CITY OF NEW BRAUNFELS, TEXAS (A political subdivision of the State of Texas located in Comal and Guadalupe Counties)

Transcription

1 NEW ISSUE BOOK-ENTRY-ONLY Rating: Moody s Aa2 S&P AA- (See OTHER PERTINENT INFORMATION Ratings herein) OFFICIAL STATEMENT Dated: April 27, 2015 In the opinion of Bond Counsel (identified below), assuming continuing compliance by the Issuer (defined below) after the date of initial delivery of the Obligations (defined below) with certain covenants contained in each of the Ordinances (defined below) and subject to the matters described under "TAX MATTERS" herein, interest on the Obligations under existing statutes, regulations, published rulings, and court decisions (1) will be excludable from the gross income of the owners thereeof for federal income tax purposes under Section 103 of the Internal Revenue Code, and (2) will not be included in computing the alternative minimum taxable income of individuals or, except as described herein, corporations. (See "TAX MATTERS" herein.) CITY OF NEW BRAUNFELS, TEXAS (A political subdivision of the State of Texas located in Comal and Guadalupe Counties) $5,395,000 $29,260,000 Combination Tax and Limited Pledge Revenue General Obligation and Refunding Bonds, Certificates of Obligation, Series 2015 Series 2015 Dated Date: April 15, 2015 Due: February 1, as shown on page 2 The City of New Braunfels, Texas (the City or Issuer ) is issuing two series of obligations as shown above, designated as the City s: $5,395,000 Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2015 (the Certificates ) and $29,260,000 General Obligation and Refunding Bonds, Series 2015 (the Bonds and together with the Certificates, collectively, the Obligations ), in accordance with the Constitution and laws of the State of Texas (the State ), particularly Chapters 1207, 1251 and 1331, as amended, Texas Government Code, Chapter 331, as amended, Texas Local Government Code, and an election held in the City on May 11, 2013 (the Election ), with respect to the Bonds, Subchapter C, Chapter 271, as amended, Local Government Code and Section , as amended, Texas Health and Safety Code with respect to the Certificates, and separate ordinances (the Bond Ordinance and the Certificate Ordinance, respectively and collectively the Ordinances ) adopted by the City Council on April 27, 2015, the date of sale of the Obligations. (See THE CERTIFICATES - Authority for Issuance and THE BONDS - Authority for Issuance herein.) The Bonds and the Certificates are being offered concurrently by the Issuer under a common Official Statement. The Bonds and Certificates are separate and distinct securities offerings under State and federal securities laws and are being issued and sold independently except for the common Official Statement, and, while the Obligations share certain common attributes, each issue is, except as hereafter described, separate from the other and should be reviewed and analyzed independently, including the type of obligation being offered, its terms for payment, the security for its payment (although the Bonds and Certificates are payable primarily from an annual ad valorem tax), the rights of holders and other features. Notwithstanding the foregoing, the Obligations are considered a single issue for federal tax purposes. The Certificates constitute direct and general obligations of the Issuer payable primarily from annual ad valorem taxes levied against all taxable property therein, within the limits prescribed by law, and are further secured by a lien on and pledge of the Pledged Revenues (being a limited amount of the Net Revenues derived from the operation of the Issuer s solid waste system (the System ) not to exceed $1,000 during the entire period the Certificates or interest thereon remain outstanding), such lien and pledge, however, being subordinate and inferior to the lien on and pledge of the Net Revenues which are or may be pledged to the payment of any Prior Lien Obligations or Junior Lien Obligations hereinafter issued by the Issuer (each as described and defined in the Certificate Ordinance). The City previously authorized the issuance of the Limited Pledge Obligations (as defined in the Certificate Ordinance) that are payable from and secured by a lien on and pledge of certain Pledged Revenues as described in the ordinances authorizing the issuance of the currently outstanding Limited Pledge Obligations. In the Certificate Ordinance, the Issuer has reserved the right to issue Prior Lien Obligations, Junior Lien Obligations, and Additional Limited Pledge Obligations without limitation as to principal amount but subject to any terms, conditions, or restrictions as may be applicable thereto under law or otherwise. (See "THE CERTIFICATES - Security for Payment" and "TAX RATE LIMITATIONS" herein.) The Bonds constitute direct and general obligations of the Issuer payable from an annual ad valorem tax levied against all taxable property in the City, within the limits prescribed by law. (See THE BONDS - Security for Payment herein.) Interest on the Obligations will accrue from April 15, 2015 (the "Dated Date") and will be payable on February 1 and August 1 of each year, commencing February 1, 2016 until stated maturity or prior redemption, and will be calculated on the basis of a 360-day year of twelve 30-day months. The definitive Obligations will be issued as fully registered obligations in book-entry form only and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ( DTC ), New York, New York. DTC will act as securities depository (the Securities Depository ). Book-entry interests in the Obligations will be made available for purchase in principal amounts of $5,000 or any integral multiple thereof within a maturity. Purchasers of the Obligations ( Beneficial Owners ) will not receive physical delivery of certificates representing their interest in the Obligations purchased. So long as DTC or its nominee is the registered owner of the Obligations, the principal of and interest on the Obligations will be payable by BOKF, NA dba Bank of Texas, Austin, Texas, as initial Paying Agent/Registrar, to the Securities Depository, which will in turn remit such principal and interest to its Participants, which will in turn remit such principal and interest to the Beneficial Owners of the Obligations. (See BOOK-ENTRY-ONLY SYSTEM herein.) Proceeds from the sale of the Certificates will be used for the purpose of paying contractual obligations of the City to be incurred for making permanent public improvements and for other public purposes, to-wit: (1) constructing, acquiring, purchasing, renovating, equipping, enlarging, and improving the City Hall Complex; (2) constructing street improvements (including utilities repair, replacement, and relocation), curb, gutters, and sidewalk improvements and drainage incidental thereto; (3) the purchase of materials, supplies, equipment, machinery, landscaping, land, and rights-of-way for authorized needs and purposes relating to the aforementioned capital improvements; and (4) the payment of professional services related to the design, construction, project management, and financing of the aforementioned projects. (See THE CERTIFICATES Use of Certificate Proceeds herein.) Proceeds from the sale of the Bonds will be used (1) to refund certain of the City s currently outstanding obligations, as identified in Schedule I attached hereto (the Refunded Obligations ), for debt service savings, (2) for the purpose of providing street improvements, to construct drainage improvements and construct and equip parks and a recreation center, and (3) to pay costs of issuance and expenses relating the Bonds. (See "THE BONDS Purpose of Bonds" herein.) SEE FOLLOWING PAGE FOR STATED MATURITIES, PRINCIPAL AMOUNTS, INTEREST RATES, INITIAL YIELDS, CUSIP NUMBERS, AND REDEMPTION PROVISIONS FOR THE OBLIGATIONS The Obligations are offered for delivery, when, as and if issued and received by the initial purchasers named below (the Underwriters ) and subject to the approving opinion of the Attorney General of the State of Texas and the approval of certain legal matters by Norton Rose Fulbright US LLP, San Antonio, Texas, Bond Counsel. Certain matters will be passed upon for the Underwriters by Andrews Kurth LLP, Austin, Texas, as counsel to the Underwriters. The applicable legal opinion of Bond Counsel will be printed on, or attached to, the Bonds and the Certificates, respectively. (See APPENDIX C - Forms of Legal Opinions of Bond Counsel.) It is expected that the Obligations will be available for delivery through DTC on or about May 21, BOSC, INC. A SUBSIDIARY OF BOK FINANCIAL CORPORATION RAYMOND JAMES FROST BANK

2 CITY OF NEW BRAUNFELS, TEXAS (A political subdivision of the State of Texas located in Comal and Guadalupe Counties) STATED MATURITY SCHEDULE CUSIP No. Prefix (1) $5,395,000 Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2015 Stated CUSIP Stated CUSIP Maturity Principal Interest Initial No. Maturity Principal Interest Initial No. 2/1 Amount Rate Yield Suffix (1) 2/1 Amount Rate Yield Suffix (1) 2016 $ 150, % 0.350% RJ $ 270, % 2.650% (2) RU , % 0.710% RK , % 3.100% RV , % 1.140% RL , % 3.270% RW , % 1.420% RM , % 3.350% RX , % 1.650% RN , % 3.420% RY , % 1.870% RP , % 3.380% (2) RZ , % 2.100% RQ , % 3.440% (2) SA , % 2.280% RR , % 3.480% (2) SB , % 2.450% RS , % 3.520% (2) SC , % 2.550% RT , % 3.550% (2) SD0 (Interest to accrue from the Dated Date) The Certificates maturing on or after February 1, 2026 are subject to optional redemption prior to their scheduled maturities at the option of the Issuer, in whole or in part, in principal amounts of $5,000 or any integral multiple thereof, on February 1, 2025 or any date thereafter, at the redemption price of par plus accrued interest to the date of redemption as further described herein. (See "THE CERTIFICATES - Redemption Provisions" herein.) $29,260,000 General Obligation and Refunding Bonds, Series 2015 Stated CUSIP Stated CUSIP Maturity Principal Interest Initial No. Maturity Principal Interest Initial No. 2/1 Amount Rate Yield Suffix (1) 2/1 Amount Rate Yield Suffix (1) 2016 $ 330, % 0.350% SE $ 3,010, % 2.650% (2) SQ , % 0.710% SF ,385, % 3.100% SR , % 1.100% SG ,780, % 3.250% SS , % 1.390% SH , % 3.350% ST , % 1.650% SJ , % 3.420% SU ,755, % 1.870% SK , % 3.380% (2) SV ,795, % 2.080% SL , % 3.440% (2) SW ,685, % 2.260% SM , % 3.480% (2) SX ,790, % 2.430% SN , % 3.520% (2) SY ,895, % 2.530% SP ,035, % 3.550% (2) SZ1 (Interest to accrue from the Dated Date) The Bonds maturing on or after February 1, 2026 are subject to optional redemption prior to their scheduled maturities at the option of the Issuer, in whole or in part, in principal amounts of $5,000 or any integral multiple thereof, on February 1, 2025 or any date thereafter, at the redemption price of par plus accrued interest to the date of redemption as further described herein. (See "THE BONDS - Redemption Provisions" herein.) (1) CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor s Financial Services LLC on behalf of the American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP services. None of the City, the Financial Advisor or the Underwriters is responsible for the selection or correctness of the CUSIP numbers set forth herein. (2) Yield calculated based on the assumption that the Certificates or Bonds, as applicable, denoted and sold at a premium are redeemed on February 1, 2025, their first date of optional redemption, at the price of par plus accrued interest to said redemption date. 2

3 CITY OF NEW BRAUNFELS TEXAS 424 S Castell Avenue New Braunfels, Texas (830) Phone (830) Facsimile ELECTED OFFICIALS Name Years Served Term Expires (May) Barron Casteel Mayor 9 months 2017 Attorney Occupation Ron Reaves Mayor Pro-Tem Retired School Superintendent/Consultant George Green, Councilmember, District Teacher Aja Edwards Patino Councilmember, District Realtor Sandy Nolte, Councilmember, District Realtor Wayne Peters Councilmember, District 5 9 months 2017 Retired Leah A. Garcia Councilmember, District 6 9 months 2017 Sales ADMINISTRATION Name Position Length of Service With the City (Years) Robert Camareno City Manager 7 Kristi Aday Assistant City Manager 1 Martie Simpson (1) Director of Finance 1 Jared Werner Assistant Director of Finance 8 Chuck Gardner Finance Manager 8 Patrick Aten City Secretary 4 Valeria Acevedo City Attorney 3 (1) Martie Simpson was appointed Director of Finance Director in December, CONSULTANTS AND ADVISORS Bond Counsel... Norton Rose Fulbright US LLP San Antonio, Texas Financial Advisor... SAMCO Capital Markets, Inc. San Antonio, Texas Auditor... Clifton Larson Allen Dallas, Texas For Additional Information Please Contact: Ms. Martie Simpson Director of Finance Mr. Jared Werner Assistant Director of Finance City of New Braunfels 424 S. Castell Avenue New Braunfels, Texas (830) Telephone (830) Facsimile msimpson@nbtexas.org jwerner@nbtexas.org 3 Mr. Mark M. McLiney Mr. Andrew T. Friedman SAMCO Capital Markets, Inc Crownhill Blvd., Suite 601 San Antonio, Texas (210) Telephone (210) Facsimile mmcliney@samcocapital.com afriedman@samcocapital.com

4 USE OF INFORMATION IN THE OFFICIAL STATEMENT No dealer, broker, salesman, or other person has been authorized to give any information, or to make any representation other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the Issuer. This Official Statement is not to be used in connection with an offer to sell or the solicitation of an offer to buy in any state in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. Any information or expression of opinion herein contained is subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create an implication that there has been no change in the affairs of the Issuer or other matters described herein since the date hereof. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder will under any circumstances create any implication that there has been no change in the information or opinions set forth herein after the date of this Official Statement. See CONTINUING DISCLOSURE OF INFORMATION for a description of the Issuer s undertaking to provide certain information on a continuing basis. The Financial Advisor has provided the following sentence for inclusion of this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with its responsibilities to the Issuer and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. The Underwriters have provided the following statement for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement pursuant to their responsibilities to investors under the federal securities laws but the Underwriters do not guarantee the accuracy or completeness of such information. THE OBLIGATIONS ARE EXEMPT FROM REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION AND CONSEQUENTLY HAVE NOT BEEN REGISTERED THEREWITH. THE REGISTRATION, QUALIFICATION, OR EXEMPTION OF THE OBLIGAITONS IN ACCORDANCE WITH APPLICABLE SECURITIES LAW PROVISIONS OF THE JURISDICTIONS IN WHICH THE OBLIGATIONS HAVE BEEN REGISTERED, QUALIFIED, OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF. NONE OF THE ISSUER, ITS FINANCIAL ADVISOR, OR THE UNDERWRITERS MAKES ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE INFORMATION CONTAINED IN THIS OFFICIAL STATEMENT REGARDING THE DEPOSITORY TRUST COMPANY OR ITS BOOK-ENTRY-ONLY SYSTEM AS SUCH INFORMATION IS PROVIDED BY DTC. The agreements of the Issuer and others related to the Obligations are contained solely in the contracts described herein. Neither this Official Statement or any other statement made in connection with the offer or sale of the Obligations is to be construed as constituting an agreement with the purchasers of the Obligations. INVESTORS SHOULD READ THE ENTIRE OFFICIAL STATEMENT, INCLUDING ALL APPENDICES ATTACHED HERETO, TO OBTAIN INFORMATION ESSENTIAL TO MAKING AN INFORMED INVESTMENT DECISION. TABLE OF CONTENTS COVER PAGE FOR THE OBLIGATIONS... 1 BOOK-ENTRY-ONLY SYSTEM ELECTED AND APPOINTED OFFICIALS... 3 INVESTMENT POLICIES USE OF INFORMATION IN THE OFFICIAL STATEMENT 4 AD VALOREM TAX PROCEDURES SELECTED DATA FROM THE OFFICIAL STATEMENT 5 TAX RATE LIMITATIONS INTRODUCTORY STATEMENT... 7 TAX MATTERS THE BONDS... 7 CONTINUING DISCLOSURE OF INFORMATION THE CERTIFICATES... 9 LEGAL MATTERS SOURCES AND USES FORWARD LOOKING STATEMENTS THE OBLIGATIONS OTHER PERTINENT INFORMATION REGISTRATION, TRANSFER AND EXCHANGE Financial Information City of New Braunfels, Texas... General Information Regarding the City of New Braunfels and Comal and Guadalupe Counties, Texas... Forms of Opinions of Bond Counsel... Excerpts from the Issuer s Audited Financial Statements for the Year Ended September 30, Appendix A Appendix B Appendix C Appendix D 4

5 SELECTED DATA FROM THE OFFICIAL STATEMENT The selected data is subject in all respects to the more complete information and definitions contained or incorporated in this Official Statement. The offering of the Bonds to potential investors is made only by means of this entire Official Statement. No person is authorized to detach this page from this Official Statement or to otherwise use it without the entire Official Statement. The Issuer The Certificates The City of New Braunfels, Texas (the "City" or Issuer ) is a municipal corporation and a political subdivision of the State of Texas located on Interstate Highway 35, 33 miles northeast of San Antonio. The City operates as a home rule city under the laws of the State of Texas. The City's 2010 population was 57,740, an increase of 60.36% since The 2015 population is 64,500. The City serves as the county seat of Comal County. The economy is primarily based on tourism and manufacturing. (See APPENDIX B - General Information Regarding the City of New Braunfels, Texas and Comal and Guadalupe Counties, Texas herein.) The Certificates are being issued pursuant to the Constitution and general laws of the State, including the Certificate of Obligation Act of 1971 (Sections through , Texas Local Government Code, as amended), and Chapter 363, Texas Health and Safety Code, as amended, a separate ordinance adopted by the City Council of the City (the Certificate Ordinance ) on April 27, 2015, and the City s Home Rule Charter. (See THE CERTIFICATES Authority for Issuance herein.) The Bonds The Bonds are being issued pursuant to the laws of the State of Texas, including Chapters 1207, 151, and 1331, as amended, Texas Government Code, Chapter 331, as amended, Texas Local Government Code, an election held on May 11, 2013, a separate ordinance (the Bond Ordinance ) adopted by the City Council of the City on April 27, 2015, and the City s Home Rule Charter. (See THE BONDS Authority for Issuance herein.) Paying Agent/Registrar Security for the Bonds Security for the Certificates Redemption Provisions The initial Paying Agent/Registrar for the Bonds is BOKF, NA dba Bank of Texas, Austin, Texas. The Bonds constitute direct and general obligations of the Issuer payable from an annual ad valorem tax levied against all taxable property in the City, within the limits prescribed by law. (See THE BONDS - Security for Payment and TAX RATE LIMITATIONS herein.) The Certificates constitute direct and general obligations of the Issuer payable primarily from annual ad valorem taxes levied against all taxable property therein, within the limits prescribed by law, and are further secured by a lien on and pledge of the Pledged Revenues (being a limited amount of the Net Revenues derived from the operation of the Issuer s solid waste system (the System ) not to exceed $1,000 during the entire period the Certificates or interest thereon remain outstanding), such lien and pledge, however, being subordinate and inferior to the lien on and pledge of the Net Revenues which are or may be pledged to the payment of any Prior Lien Obligations or Junior Lien Obligations hereafter issued by the Issuer (each as described and defined in the Certificate Ordinance). The City previously authorized the issuance of the Limited Pledge Obligations (as defined in the Certificate Ordinance) that are payable from and secured by a lien on and pledge of certain Pledged Revenues as described in the ordinances authorizing the issuance of the currently outstanding Limited Pledge Obligations. In the Certificate Ordinance, the Issuer has reserved the right to issue Prior Lien Obligations, Junior Lien Obligations, and Additional Limited Pledge Obligations without limitation as to principal amount but subject to any terms, conditions, or restrictions as may be applicable thereto under law or otherwise. (See "THE CERTIFICATES - Security for the Certificates" and "TAX RATE LIMITATIONS" herein) The Bonds maturing on or after February 1, 2026 are subject to optional redemption prior to their scheduled maturities at the option of the Issuer, in whole or in part, in principal amounts of $5,000 or any integral multiple thereof, on February 1, 2025 or any date thereafter, at the redemption price of par plus accrued interest as further described herein. (See "THE BONDS - Redemption Provisions" herein.) The Certificates maturing on or after February 1, 2026 are subject to optional redemption prior to their scheduled maturities at the option of the Issuer, in whole or in part, in principal amounts of $5,000 or any integral multiple thereof, on February 1, 2025 or any date thereafter, at the redemption price of par plus accrued interest as further described herein. (See "THE CERTIFICATES - Redemption Provisions" herein.) Tax Matters In the opinion of Bond Counsel, the interest on the Obligations will be excludable from gross income of the owners thereof for purposes of federal income taxation under existing statutes, regulations, published rulings and court decisions, subject to the matters described under TAX MATTERS herein, including the alternative minimum tax on corporations. (See TAX MATTERS and APPENDIX C - Forms of Legal Opinions of Bond Counsel herein.) 5

6 Use of Proceeds of the Certificates Use of Proceeds of the Bonds Book-Entry-Only System Ratings Payment Record Proceeds from the sale of the Certificates will be used for the purpose of paying contractual obligations of the City to be incurred for making permanent public improvements, to-wit: (1) constructing, acquiring, purchasing, renovating, equipping, enlarging, and improving the City Hall Complex; (2) constructing street improvements (including utilities repair, replacement, and relocation), curb, gutters, and sidewalk improvements and drainage incidental thereto; (3) the purchase of materials, supplies, equipment, machinery, landscaping, land, and rights-of-way for authorized needs and purposes relating to the aforementioned capital improvements; and (4) the payment of professional services related to the design, construction, project management, and financing of the aforementioned projects. (See THE CERTIFICATES - Use of Certificate Proceeds herein.) Proceeds from the sale of the Bonds will be used (1) to refund certain of the City s currently outstanding obligations, as identified in Schedule I attached hereto (the Refunded Obligations ), for debt service savings, (2) for the purpose of providing street improvements, to construct drainage improvements and construct and equip parks and a recreation center, and (3) to pay costs of issuance and expenses relating the Bonds. (See THE BONDS - Purpose herein.) The Issuer intends to utilize the Book-Entry-Only System of DTC described herein. No physical delivery of the Obligations will be made to the beneficial owners of the Obligations. Such Book- Entry-Only System may affect the method and timing of payments on the Bonds and the manner in which the Bonds may be transferred. (See BOOK-ENTRY-ONLY SYSTEM herein.) Moody s Investors Service, Inc. ( Moody s ) has assigned an unenhanced underlying rating of Aa2 to the Obligations and Standard & Poor s Ratings Services, a Standard & Poor s Financial Services LLC business ( S&P ) has assigned an unenhanced, underlying rating of AA-. (See "OTHER PERTINENT INFORMATION - Ratings" herein.) The City has never defaulted on the payment of its ad valorem tax backed indebtedness. Delivery When issued, anticipated on or about May 21, Legality Delivery of the Obligations is subject to the approval by the Attorney General of the State of Texas and the rendering of opinions as to certain legal matters by Norton Rose Fulbright US LLP, San Antonio, Texas, Bond Counsel. See APPENDIX C Forms of Legal Opinions of Bond Counsel herein. 6

7 OFFICIAL STATEMENT Relating to CITY OF NEW BRAUNFELS, TEXAS (A political subdivision of the State of Texas located in Comal and Guadalupe Counties) $5,395,000 Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2015 $29,260,000 General Obligation and Refunding Bonds, Series 2015 INTRODUCTORY STATEMENT This Official Statement provides certain information in connection with the issuance by the City of New Braunfels, Texas (the City or Issuer ) of its $5,395,000 Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2015 (the Certificates ) and its $29,260,000 General Obligation and Refunding Bonds, Series 2015 (the Bonds and, together with the Certificates, collectively the Obligations ), each as further identified on the cover page hereof. The Issuer is a political subdivision of the State of Texas and a home-rule municipal corporation organized and existing under the laws of the State of Texas. The Obligations are being issued pursuant to the Constitution and general laws of the State of Texas and separate ordinances (respectively, the Bond Ordinance and the Certificate Ordinance, and collectively, the Ordinances ) adopted by the City Council on April 27, 2015, the date of sale of the Obligations. (See THE BONDS - Authority for Issuance and THE CERTIFICATES - Authority for Issuance herein.) The Bonds and the Certificates are being offered concurrently by the Issuer under a common Official Statement. The Bonds and Certificates are separate and distinct securities offerings under State and federal securities laws and are being issued and sold independently, except for the common Official Statement, and, while the Obligations share certain common attributes, each issue is, except as hereafter described, separate from the other and should be reviewed and analyzed independently, including the type of obligation being offered, its terms for payment, the security for its payment (although the Bonds and Certificates are payable primarily from an annual ad valorem tax), the rights of holders and other features. Notwithstanding the foregoing, the Obligations are considered a single issue for federal tax purposes. Unless otherwise indicated, capitalized terms used in this Official Statement have the same meanings assigned to such terms in the applicable Ordinance. Included in this Official Statement are descriptions of the Obligations and certain information about the Issuer and its finances. ALL DESCRIPTIONS OF DOCUMENTS CONTAINED HEREIN ARE SUMMARIES ONLY AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO EACH SUCH DOCUMENT. Copies of such documents may be obtained upon request from the Issuer or its Financial Advisor, SAMCO Capital Markets, Inc., 8700 Crownhill Blvd., San Antonio, Texas 78209, via electronic mail or upon payment of reasonable copying, handling, and delivery charges. This Official Statement speaks only as to its date, and the information contained herein is subject to change. A copy of the final Official Statement pertaining to the Obligations and the Escrow Agreement (defined herein) relative to the Bonds will be deposited with the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access (EMMA) system. See CONTINUING DISCLOSURE OF INFORMATION herein for a description of the City s undertaking to provide certain information on a continuing basis. Purpose of Bonds THE BONDS Proceeds from the sale of the Bonds will be used for (1) to refund certain of the City s currently outstanding obligations, as identified in Schedule I attached hereto, for debt service savings (the Refunded Obligations ), (2) for the purpose of providing street improvements, to construct drainage, improvements and construct and equip parks and a recreation center, and (3) to pay costs of issuance and expenses relating the Bonds. Refunded Obligations The principal and interest due on the Refunded Obligations are to be paid on the scheduled interest payment dates and the redemption dates of such Refunded Obligations, from funds to be deposited pursuant to a certain Escrow and Trust Agreement (the "Escrow Agreement") between the City and BOKF, NA dba Bank of Texas, Austin, Texas (the "Escrow Agent"). The Bond Ordinance provides that from the proceeds of the sale of the Bonds received from the Underwriters, the City will deposit with the Escrow Agent the amount necessary to accomplish the discharge and final payment of the Refunded Obligations on the redemption dates. Such funds will be held by the Escrow Agent in a special escrow account (the "Escrow Fund") and used to purchase a portfolio of securities authorized by Section , Texas Government Code, which authorizes securities, including direct noncallable obligations of the United States and noncallable obligations of an agency or instrumentality of the United States rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent and guaranteed by the full faith and credit of the United States of America (the Federal Securities ) maturing in time to make such payment. Under the Escrow Agreement, the Escrow Fund is irrevocably pledged to the payment of the principal of and interest on the Refunded Obligations. 7

8 Simultaneously with the issuance of the Bonds, the City will give irrevocable instructions to provide notice to the owners of the Refunded Obligations that the Refunded Obligations will be redeemed prior to stated maturity on which date money will be made available to redeem the Refunded Obligations from money held under the Escrow Agreement. The issuance of the Bonds will be subject to delivery by Barthe & Wahrman, P.A., Minneapolis, Minnesota, certified public accountants (the Verification Agents ), of a report of the mathematical accuracy of certain computations. The Verification Agents will verify from the information provided to them the mathematical accuracy as of the date of the closing on the Bonds of (1) the computations contained in the provided schedules to determine that the anticipated receipts from the Federal Securities and cash deposits, if any, listed in the schedules provided by SAMCO Capital Markets, Inc., as financial advisor to the City, to be held in escrow, will be sufficient to pay, when due, the principal and interest requirements of the Refunded Obligations and (2) the computations of yield on both the Federal Securities and the Bonds, as contained in the provided schedules, which verification will be used by Bond Counsel in its determination that the interest on the Bonds is excludable from the gross income of the holders thereof and for the defeasance of the Refunded Obligations. The Verification Agents will express no opinion on the assumptions provided to them, nor as to the exemption from taxation of the interest on the Bonds. See OTHER PERTINENT INFORMATION Verification of Arithmetical and Mathematical Computations herein. By the deposit of the Federal Securities and cash, if any, described above with the Escrow Agent pursuant to the Escrow Agreement, the City will have effected the defeasance of the Refunded Obligations, pursuant to the terms of the ordinances authorizing the issuance of the Refunded Obligations. It is the opinion of Bond Counsel that, as a result of such defeasance, and in reliance upon the report provided by the Verification Agents, the Refunded Obligations will no longer be payable from ad valorem taxes but will be payable solely from the Federal Securities and cash, if any, on deposit in the Escrow Fund and held for such purpose by the Escrow Agent, and that the Refunded Obligations will be defeased and are not to be included in or considered to be indebtedness of the City for the purpose of a limitation of indebtedness or for any other purpose. See APPENDIX C - Forms of Legal Opinions of Bond Counsel herein. The City has covenanted in the Escrow Agreement to make timely deposits to the Escrow Fund, from lawfully available funds, of any additional amounts required to pay the principal of and interest on the Refunded Obligations, if for any reason, the cash balances on deposit or scheduled to be on deposit in the Escrow Fund should be insufficient to make such payment. General Description The Bonds will be dated April 15, 2015 (the Dated Date ). Interest on the Bonds will accrue from the Dated Date, with such interest payable on February 1 and August 1 in each year, commencing February 1, 2016, until stated maturity or prior redemption thereof. The Bonds will mature on the dates, in the principal amounts, and will bear interest at the rates set forth on page 2 of this Official Statement. The Bonds will be issued only as fully registered bonds. The Bonds will be issued in denominations of $5,000 principal or any integral multiple thereof within a stated maturity. Interest on the Bonds is payable by check mailed on or before each interest payment date by the Paying Agent/Registrar, initially BOKF, NA dba Bank of Texas, Austin, Texas, to the registered owner at the last known address as it appears on the Bond registration books maintained by the Paying Agent/Registrar (the Register ) on the Record Date (defined herein) or by such other customary banking arrangement acceptable to the Paying Agent/Registrar and the registered owner to whom interest is to be paid; provided, however, that such person shall bear all risk and expense of such other arrangements. Principal of the Bonds will be payable only upon presentation of such Bonds at the corporate trust office of the Paying Agent/Registrar at stated maturity or prior redemption. So long as the Bonds are registered in the name of CEDE & CO. or other nominee for The Depository Trust Company ( DTC ), payments of principal of and interest on the Bonds will be made as described in BOOK-ENTRY-ONLY SYSTEM herein. If the date for the payment of the principal of or interest on the Bonds is a Saturday, Sunday, a legal holiday or a day when banking institutions in the city where the Paying Agent/Registrar is located are authorized by law or executive order to close, then the date for such payment will be the next succeeding day which is not a Saturday, Sunday, legal holiday or a day on which banking institutions are authorized to close; and payment on such date will have the same force and effect as if made on the original date payment was due. Authority for Issuance The Bonds are being issued pursuant to the laws of the State, including Chapters 1207, 1251, and 1331, Texas Government Code, as amended, the Bond Ordinance adopted on April 27, 2015, by the City Council, a Bond Election held on May 11, 2013 and the City s Home Rule Charter. Security for Payment The Bonds are direct obligations payable from an annual ad valorem tax levied, within the limitations prescribed by law, on all taxable property located within the City. (See "TAX RATE LIMITATIONS" herein.) Redemption Provisions The City reserves the right to redeem Bonds, at its option, maturing on or after February 1, 2026 in whole or in part, in principal amounts of $5,000 or any integral multiple thereof, on February 1, 2025, or any date thereafter at the redemption price of par plus accrued interest to the date fixed for redemption. 8

9 Notice of Redemption and DTC Notices for the Bonds If less than all of the Bonds are to be redeemed, the City shall determine the amounts and maturities thereof to be redeemed and shall direct the Paying Agent/Registrar to select by lot the Bonds, or portions thereof, to be redeemed. Not less than 30 days prior to a redemption date for the Bonds, the City shall cause a notice of redemption to be sent by United States mail, first-class, postage prepaid, to each registered owner of a Bond to be redeemed, in whole or in part, at the address of the registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the business day next preceding the date of mailing such notice. ANY NOTICE OF REDEMPTION SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN IRRESPECTIVE OF WHETHER RECEIVED BY THE BONDHOLDER, AND INTEREST ON THE REDEEMED BONDS SHALL CEASE TO ACCRUE FROM AND AFTER SUCH REDEMPTION DATE NOTWITHSTANDING THAT A BOND HAS NOT BEEN PRESENTED FOR PAYMENT. All notices of redemption shall (i) specify the date of redemption for the Bonds, (ii) identify the Bonds to be redeemed and, in the case of a portion of the principal amount to be redeemed, the principal amount thereof to be redeemed, (iii) state the redemption price, (iv) state that the Bonds, or the portion of the principal amount thereof to be redeemed, shall become due and payable on the redemption date specified, and the interest thereon, or on the portion of the principal amount thereof to be redeemed, shall cease to accrue from and after the redemption date, and (v) specify that payment of the redemption price for the Bonds, or the principal amount thereof to be redeemed, shall be made at the designated corporate trust office of the Paying Agent/Registrar only upon presentation and surrender thereof by the registered owner. The Paying Agent/Registrar and the City, so long as a Book-Entry-Only System is used for the Bonds, will send any notice of redemption, notice of proposed amendment to the Ordinance or other notices with respect to the Bonds only to DTC. Any failure by DTC to advise any DTC participant, or of any Direct Participant (defined herein) or Indirect Participant (defined herein) to notify the Beneficial Owner (defined herein), shall not affect the validity of the redemption of the Bonds called for redemption or any other action premised on any such notice. Redemption of portions of the Bonds by the City will reduce the outstanding principal amount of such Bonds held by DTC. In such event, DTC may implement, through its Book-Entry-Only System, a redemption of such Bonds held for the account of DTC participants in accordance with its rules or other agreements with Direct participants and then Direct participants and Indirect Participants may implement a redemption of such Bonds from the Beneficial Owners. Any such selection of Bonds to be redeemed will not be governed by the Ordinance and will not be conducted by the City or the Paying Agent. Neither the City nor the Paying Agent will have any responsibility to Direct Participants, Indirect Participants or the persons for whom DTC Participants act as nominees, with respect to the payments on the Bonds or the providing of notice to Direct Participants, Indirect Participants, or Beneficial Owners of the selection of portions of the Bonds for redemption. See "BOOK-ENTRY-ONLY SYSTEM" herein. General Description of the Certificates THE CERTIFICATES The Certificates will be dated April 15, 2015 (the "Dated Date"). The Certificates are stated to mature on February 1 in the years and in the principal amounts and will bear interest at per annum rates as set forth on page ii hereof. The Certificates will be issued only in fully registered form and in denominations of $5,000 or any integral multiple thereof within a stated maturity. The Certificates shall bear interest from the Dated Date on the unpaid principal amounts, and the amount of interest to be paid each payment period shall be computed on the basis of a 360-day year of twelve 30-day months. Interest on the Certificates will be payable on February 1 and August 1 of each year commencing February 1, 2016 until stated maturity or prior redemption. Principal is payable at the designated office of the Paying Agent/Registrar, initially BOKF, NA dba Bank of Texas, Austin, Texas. Initially, the Certificates will be registered and delivered only to Cede & Co., the nominee of The Depository Trust Company ( DTC ) pursuant to the Book-Entry-Only System described below. No physical delivery of the Certificates will be made to the Beneficial Owners. Principal of, premium, if any, and interest on the Certificates will be payable by the Paying Agent/Registrar to Cede & Co. which will distribute the amounts received to the Beneficial Owners of the Certificates. Such Book-Entry-Only System may change the method and timing of payment for the Certificates and the method of transfer. See BOOK-ENTRY- ONLY SYSTEM herein. Authority for Issuance The Certificates are being issued pursuant to the Certificate of Obligation Act of 1971, Sections through , Texas Local Government Code, as amended, Section , Texas Health and Safety Code, as amended, an ordinance (the "Certificate Ordinance" and together with the Bond Ordinance, the Ordinances ) adopted on April 27, 2015, the date of sale of the Certificates by the City Council of the City, and the City s Home Rule Charter. Security for Payment The Certificates constitute direct and general obligations of the Issuer payable primarily from ad valorem taxes levied annually against all taxable property therein, within the limits prescribed by law (See TAX RATE LIMITATIONS herein). In addition, the Certificates are further secured by a lien on and pledge of the Pledged Revenues (being a limited amount of the Net Revenues derived from the operation of the Issuer s combined utility system (the System ) not to exceed $1,000 during the entire period the Certificates or interest thereon remain outstanding), such lien and pledge, however, being subordinate and inferior to the lien on and pledge of the Net Revenues which are or may be pledged to the payment of any Prior Lien Obligations or Junior Lien Obligations hereafter issued by the Issuer (each as described and defined in the Certificate Ordinance). The City previously authorized the issuance of the Limited Pledge Obligations (as defined in the Certificate Ordinance) that are payable from and secured by a lien on and pledge of certain Pledged Revenues as described in the ordinances authorizing the issuance of the currently outstanding Limited Pledge Obligations. In the Certificate Ordinance, the Issuer has reserved the right to issue Prior Lien Obligations, Junior Lien Obligations, and Additional Limited Pledge Obligations without limitation as to principal amount but subject to any terms, conditions, or restrictions as may be applicable thereto under law or otherwise. 9

10 Use of Certificate Proceeds Proceeds from the sale of the Certificates will be used for the purpose of paying contractual obligations of the City to be incurred for making permanent public improvements, to-wit: (1) constructing, acquiring, purchasing, renovating, equipping, enlarging, and improving the City Hall Complex; (2) constructing street improvements (including utilities repair, replacement, and relocation), curb, gutters, and sidewalk improvements and drainage incidental thereto; (3) the purchase of materials, supplies, equipment, machinery, landscaping, land, and rights-of-way for authorized needs and purposes relating to the aforementioned capital improvements; and (4) the payment of professional services related to the design, construction, project management, and financing of the aforementioned projects. Redemption Provisions The Issuer reserves the right, at its sole option, to redeem Certificates stated to mature on or after February 1, 2026 in whole or from time to time in part, in principal amounts of $5,000 or any integral multiple thereof on February 1, 2025, or any date thereafter, at the par value thereof plus accrued interest from the most recent interest payment date to the date fixed for redemption. Notice of Redemption and DTC Notices for the Certificates If less than all of the Certificates within a stated maturity are to be redeemed, the particular Certificates to be redeemed shall be selected by lot or by other customary random method by the Paying Agent/Registrar. At least 30 days prior to the date fixed for any redemption of any Certificates or portions thereof prior to stated maturity, the Issuer shall cause notice of such redemption to be sent by United States mail, first-class postage prepaid, to the registered owner of each Certificate or a portion thereof to be redeemed at its address as it appeared on the registration books of the Paying Agent/Registrar on the day such notice of redemption is mailed. By the date fixed for any such redemption, due provision shall be made with the Paying Agent/Registrar for the payment of the required redemption price for the Certificates or portions thereof which are to be so redeemed. If such notice of redemption is given and if due provision for such payment is made, all as provided above, the Certificates or portions thereof which are to be so redeemed thereby automatically shall be treated as redeemed prior to their scheduled maturities, and they shall not bear interest after the date fixed for redemption, and they shall not be regarded as being outstanding except for the right of the registered owner to receive the redemption price from the Paying Agent/Registrar out of the funds provided for such payment. ANY NOTICE OF REDEMPTION SO MAILED SHALL BE CONCLUSIVELY PRESUMED TO HAVE BEEN DULY GIVEN IRRESPECTIVE OF WHETHER ONE OR MORE HOLDERS OF CERTIFICATES FAILED TO RECEIVE SUCH NOTICE. Certificates of a denomination larger than $5,000 may be redeemed in part ($5,000 or any integral multiple thereof). Any Certificate to be partially redeemed must be surrendered in exchange for one or more new Certificates of the same stated maturity and interest rate for the unredeemed portion of the principal. Redemption of portions of the Certificates by the Issuer will reduce the outstanding principal amount of such Certificates held by DTC. In such event, DTC may implement, through its Book-Entry-Only System, a redemption of such Certificates held for the account of DTC participants in accordance with its rules or other agreements with DTC participants and then DTC participants and indirect participants may implement a redemption of such Certificates from the beneficial owners. Any such selection of Certificates to be redeemed will not be governed by the Certificate Ordinance and will not be conducted by the Issuer or the Paying Agent/Registrar. (See "BOOK-ENTRY-ONLY SYSTEM" herein.) SOURCES AND USES OF FUNDS The proceeds from the sale of the Obligations, together with a cash contribution of the Issuer to be applied to the refunding of the Refunded Obligations, will be applied approximately as follows: Sources of Funds The Bonds The Certificates Par Amount $ 29,260, $ 5,395, Accrued Interest 120, , Net Original Issue Reoffering Premium 3,087, , City Cash Contribution 441, Total Sources of Funds $ 32,910, $ 5,635, Uses of Funds Deposit to Project Fund $ 15,290, $ 5,500, Deposit to Escrow Fund 17,101, Costs of Issuance 217, , Underwriters Discount 180, , Deposit to Bond Fund or Certificate Fund 120, , Total Uses of Funds $ 32,910, $ 5,635,

11 Payment Record THE OBLIGATIONS The City has never defaulted on the payment of its ad valorem tax-backed indebtedness. Legality The Obligations are offered when, as and if issued, subject to the approval by the Attorney General of the State of Texas and the rendering of opinions as to certain legal matters by Norton Rose Fulbright US LLP, San Antonio, Texas ( Bond Counsel ). The applicable legal opinion of Bond Counsel will accompany the related series of Obligations to be deposited with DTC or will be printed on such related series of Obligations should the Book-Entry-Only System be discontinued. Forms of the legal opinions of Bond Counsel appear in Appendix C attached hereto. Defeasance Each Ordinance provides that any Obligation will be deemed paid and will no longer be considered to be outstanding within the meaning of each respective Ordinance when payment of principal of and interest on such Obligation to its maturity or prior redemption has been made or provided for. Payment may be provided for by deposit of any combination of (1) money in an amount sufficient to make such payment and/or (2) Government Securities certified, in the case of a net defeasance, by an independent public accounting firm of national reputation to be of such maturities and interest payment dates and bear such interest as will, without reinvestment, be sufficient to make the payment to be provided for on the Obligation; provided, however, that no certification by an independent accounting firm of the sufficiency of deposits shall be required in connection with a gross defeasance of Obligations. Each Ordinance provides that Government Obligations means (a) direct, noncallable obligations of the United States of America, including obligations that are unconditionally guaranteed by the United States of America, (b) noncallable obligations of an agency or instrumentality of the United States of America, including obligations that are unconditionally guaranteed or insured by the agency or instrumentality and that, on the date the governing body of the City authorizes the defeasance, are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, (c) noncallable obligations of a state or an agency or a county, municipality, or other political subdivision of a state that on the date the governing body of the City adopts or approves the proceedings authorizing the financial arrangements have been refunded and are rated as to investment quality by a nationally recognized investment rating firm not less than AAA or its equivalent, and (d) any additional securities and obligations hereafter authorized by Texas law as eligible for use to accomplish the discharge of obligations such as the Obligations. There is no assurance that the ratings for U.S. Treasury securities acquired to defease any Obligations, or those for any other Government Obligations, will be maintained at any particular rating category. Further, there is no assurance that current State law will not be amended in a manner that expands or contracts the list of permissible defeasance securities (such list consisting of those securities identified in clauses (a) through (c) above), or any rating requirement thereon, that may be purchased with defeasance proceeds relating to the Obligations ( Defeasance Proceeds ), though the City has reserved the right to utilize any additional securities for such purpose in the event the aforementioned list is expanded. Because the Ordinances do not contractually limit such permissible defeasance securities and expressly recognizes the ability of the City to use lawfully available Defeasance Proceeds to defease all or any portion of the Obligations, registered owners of Obligations are deemed to have consented to the use of Defeasance Proceeds to purchase such other defeasance securities, notwithstanding the fact that such defeasance securities may not be of the same investment quality as those currently identified under Texas law as permissible defeasance securities. Upon such deposit as described above, such Obligations shall no longer be regarded to be outstanding or unpaid. After firm banking and financial arrangements for the discharge and final payment of such Obligations have been made as described above, all rights of the City to initiate proceedings to call the Certificates for redemption or to take any other action amending the terms of the Obligations are extinguished; provided, however, the City has reserved the option, to be exercised at the time of the defeasance of the Obligation, to call for redemption at an earlier date those Certificates which have been defeased to their maturity date, if the City (i) in the proceedings providing for the firm banking and financial arrangements, expressly reserves the right to call the Certificates for redemption, (ii) gives notice of the reservation of that right to the owners of the Certificates immediately following the making of he firm banking and financial arrangements, and (iii) directs that notice of the reservation be included in any redemption notices that it authorizes. Amendments The Issuer may amend the respective Ordinances without the consent of or notice to any registered owners in any manner not detrimental to the interests of the registered owners, including the curing of any ambiguity, inconsistency, or formal defect or omission therein. In addition, the Issuer may, with the written consent of the holders of a majority in aggregate principal amount of the particular series of Obligations to which such amendment relates then outstanding affected thereby, amend, add to, or rescind any of the provisions of the applicable Ordinance; except that, without the consent of the registered owners of all of the Obligations affected, no such amendment, addition, or rescission may (1) change the date specified as the date on which the principal of or any installment of interest on any Obligation is due and payable, reduce the principal amount thereof the redemption price, or the rate of interest thereon, change the place or places at or the coin or currency in which any Obligation or interest thereon is payable, or in any other way modify the terms of payment of the principal of or interest on the Obligations, (2) give any preference to any Obligation over any other Obligation of the same series, or (3) reduce the aggregate principal amount of Obligations required for consent to any amendment, change, modification, or waiver. Default and Remedies If the City defaults in the payment of principal, interest, or redemption price on the Obligations when due, or if it fails to make payments into any fund or funds created in the Ordinances, or defaults in the observation or performance of any other covenants, conditions, or obligations set forth in the Ordinances, the registered owners may seek a writ of mandamus to compel City officials to carry out their legally imposed duties with respect to the Obligations, if there is no other available remedy at law to compel performance of the Obligations or the applicable Ordinance and the City s obligations are not uncertain or disputed. The issuance of a writ of mandamus is controlled by equitable principles, so rests with the discretion of the court, but may not be 11

12 arbitrarily refused. There is no acceleration of maturity of the Obligations in the event of default and, consequently, the remedy of mandamus may have to be relied upon from year to year. The Ordinances do not provide for the appointment of a trustee to represent the interest of the bondholders upon any failure of the City to perform in accordance with the terms of the Ordinances, or upon any other condition and, accordingly, all legal actions to enforce such remedies would have to be undertaken at the initiative of, and be financed by, the registered owners. The Texas Supreme Court ruled in Tooke v. City of Mexia, 197 S.W.3d 325 (Tex. 2006) that a waiver of sovereign immunity in a contractual dispute must be provided for by statute in clear and unambiguous language. Because it is unclear whether the Texas legislature has effectively waived the City s sovereign immunity from a suit for money damages, bondholders may not be able to bring such a suit against the City for breach of the Obligations or the Ordinances. Even if a judgment against the City could be obtained, it could not be enforced by direct levy and execution against the City s property. Further, the registered owners cannot themselves foreclose on property within the City or sell property within the City to enforce the tax lien on taxable property to pay the principal of and interest on the Obligations. Furthermore, the City is eligible to seek relief from its creditors under Chapter 9 of the U.S. Bankruptcy Code ( Chapter 9 ). Although Chapter 9 provides for the recognition of a security interest represented by a specifically pledged source of revenues, the pledge of ad valorem taxes in support of a general obligation of a bankrupt entity is not specifically recognized as a security interest under Chapter 9. Chapter 9 also includes an automatic stay provision that would prohibit, without Bankruptcy Court approval, the prosecution of any other legal action by creditors or bondholders of an entity which has sought protection under Chapter 9. Therefore, should the City avail itself of Chapter 9 protection from creditors, the ability to enforce would be subject to the approval of the Bankruptcy Court (which could require that the action be heard in Bankruptcy Court instead of other federal or state court); and the Bankruptcy Code provides for broad discretionary powers of a Bankruptcy Court in administering any proceeding brought before it. The opinions of Bond Counsel will note that all opinions relative to the enforceability of the Ordinances and the Obligations are qualified with respect to the customary rights of debtors relative to their creditors and by general principles of equity which permit the exercise of judicial discretion. Paying Agent/Registrar REGISTRATION, TRANSFER AND EXCHANGE The initial Paying Agent/Registrar for the Obligations is BOKF, NA dba Bank of Texas, Austin, Texas. In the Ordinances, the Issuer retains the right to replace the Paying Agent/Registrar. If the Paying Agent/Registrar is replaced by the Issuer, the new Paying Agent/Registrar shall accept the previous Paying Agent/Registrar's records and act in the same capacity as the previous Paying Agent/Registrar. Any successor Paying Agent/Registrar, selected at the sole discretion of the Issuer, shall be a commercial bank, trust company or other entity authorized to serve as a Paying Agent/Registrar. Upon a change in the Paying Agent/Registrar for a series of Obligations, the Issuer agrees to promptly cause written notice thereof to be sent to each registered owner of such series of Obligations affected by the change by United States mail, first-class, postage prepaid. The Obligations will be issued in fully registered form in integral multiples of $5,000 for any one stated maturity, and principal and semiannual interest will be paid by the Paying Agent/Registrar. Interest will be paid by check mailed on each interest payment date by the Paying Agent/Registrar to the registered owner at the last known address as it appears on the Paying Agent/Registrar's books or by such other method, acceptable to the Paying Agent/Registrar, requested by and at the risk and expense of the registered owner. As earlier stated, principal will be paid to the registered owner at stated maturity upon presentation to the Paying Agent/Registrar; provided, however, that so long as DTC s Book-Entry-Only System is utilized, all payments will be made as described under BOOK-ENTRY-ONLY SYSTEM herein. If the date for the payment of the principal of or interest on the Obligations shall be a Saturday, Sunday, a legal holiday or a day when banking institutions in the city where the Paying Agent/Registrar is located are authorized to close, then the date for such payment shall be the next succeeding day which is not such a day, and payment on such date shall have the same force and effect as if made on the date payment was due. Record Date and Special Record Date The record date ( Record Date ) for determining to whom the interest on an Obligation is payable on any Interest Payment Date means the 15 th day of the month next preceding such Interest Payment Date. In the event of a non-payment of interest on an Interest Payment Date, and for 30 days thereafter, a new record date for such interest payment (a Special Record Date ) will be established by the Paying Agent/Registrar, if and when funds for the payment of such interest have been received from the Issuer. Notice of the Special Record Date and of the scheduled payment date of the past due interest (the Special Payment Date, which shall be 15 days after the Special Record Date) shall be sent at least five business days prior to the Special Record Date by United States mail, first class postage prepaid, to the address of each registered owner appearing on the registration books of the Paying Agent/Registrar at the close of business on the last business day next preceding the date of mailing of such notice. Future Registration The Obligations are initially to be issued utilizing the Book-Entry-Only system of DTC. In the event such Book-Entry-Only System should be discontinued, printed certificates will be delivered to the registered owners and thereafter the Bonds may be transferred, registered, and assigned on the registration books of the Paying Agent/Registrar only upon presentation and surrender thereof to the Paying Agent/Registrar, and such registration and transfer shall be without expense or service charge to the registered owner, except for any tax or other governmental charges required to be paid with respect to such registration and transfer. An Obligation may be assigned by the execution of an assignment form on the Bond or Certificate, as applicable, or by other instrument of transfer and assignment acceptable to the Paying Agent/Registrar. A new Obligation or Obligations will be delivered by the Paying Agent/Registrar in lieu of the Obligations being transferred or exchanged at the designated office of the Paying Agent/Registrar, or sent by United States registered mail to the new registered owner at the registered owner's request, risk and expense. New Obligations issued in an exchange or transfer of Obligations will be delivered to the registered owner or assignee of the registered owner in not more than three (3) business days after the receipt of the Obligations to be canceled in the exchange or transfer and the written instrument of transfer or request for exchange duly executed by the registered owner or his duly authorized agent, in form satisfactory to the Paying Agent/Registrar. New Obligations registered and delivered in an exchange or transfer shall be in denominations of $5,000 for any one stated maturity or any integral multiple thereof and for a like aggregate principal amount and rate of interest as the Obligation or Obligations surrendered for exchange or transfer. (See BOOK-ENTRY-ONLY SYSTEM herein for a description of the system to be initially utilized in regard to ownership and transferability of the Bonds.) 12

13 Limitation on Transfer or Exchange of Obligations The Paying Agent/Registrar shall not be required to transfer or exchange any Obligations or any portion thereof during the period commencing with the close of business on any Record Date and ending with the opening of business on the next following principal or interest payment date. In addition, neither the City or the Paying Agent/Registrar shall be required to issue, transfer, or exchange any Certificate called for redemption, in whole or in part, within 45 days of the date fixed for redemption; provided, however, such limitation of transfer shall not be applicable to an exchange by the registered owner of the uncalled balance of a Certificate called for redemption in part. Replacement Obligations In each Ordinance, provision is made for the replacement of mutilated, destroyed, lost, or stolen Obligations of a particular series issued under such Ordinance upon surrender of the mutilated Obligations to the Paying Agent/Registrar, or the receipt of satisfactory evidence of destruction, loss, or theft, and the receipt by the Issuer and Paying Agent/Registrar of security or indemnity as may be required by either of them to hold them harmless. The Issuer may require payment of taxes, governmental charges, and other expenses in connection with any such replacement. BOOK-ENTRY-ONLY SYSTEM This section describes how ownership of the Obligations is to be transferred and how the principal of, premium, if any, and interest on the Obligations are to be paid to and credited by the Depository Trust Company, New York, New York ( DTC ) while the Obligations are registered in its nominee name. The information in this section concerning DTC and the Book-Entry-Only System has been provided by DTC for use in disclosure documents such as this Official Statement. The City, the Financial Advisor, and the Underwriters believe the source of such information to be reliable, but take no responsibility for the accuracy or completeness thereof. The City, the Financial Advisors, and the Underwriters cannot and do not give any assurance that (1) DTC will distribute payments of debt service on the Obligations, or any notices, to DTC Participants, (2) DTC Participants or others will distribute debt service payments paid to DTC or its nominee (as the registered owner of the applicable series of Obligations), or any notices, to the Beneficial Owners, or that they will do so on a timely basis, or (3) DTC will serve and act in the manner described in this Official Statement. The current rules applicable to DTC are on file with the United States Securities and Exchange Commission (the SEC ), and the current procedures of DTC to be followed in dealing with DTC Participants are on file with DTC. DTC will act as securities depository for the Obligations. The Obligations will be issued as fully registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered certificate will be issued for each maturity of the Obligations, in the aggregate principal amount of each maturity, and will be deposited with DTC. DTC, the world s largest depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of certificated securities. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). Direct Participants and Indirect Participants are jointly referred to as Participants. DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the SEC. More information about DTC can be found at Purchases of Obligations under the DTC system must be made by or through Direct Participants, which will receive a credit for the Obligations on DTC s records. The ownership interest of each actual purchaser of Obligations ( Beneficial Owner ) is in turn to be recorded on the Participants records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Obligations are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Obligations representing their ownership interests in Obligations, except in the event that use of the book-entry system for the Obligations is discontinued. To facilitate subsequent transfers, all Obligations deposited by Direct Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Obligations with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Obligations; DTC s records reflect only the identity of the Direct Participants to whose accounts such Obligations are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Obligations may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Obligations, such as 13

14 redemptions, tenders, defaults, and proposed amendments to the Obligation documents. For example, Beneficial Owners of Obligations may wish to ascertain that the nominee holding the Obligations for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them. Neither DTC or Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Obligations unless authorized by a Direct Participant in accordance with DTC s Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co. s consenting or voting rights to those Direct Participants to whose accounts Obligations are credited on the Record Date (identified in a listing attached to the Omnibus Proxy). Redemption notices shall be sent to DTC. If less than all of the Obligations within an issue are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Payments on the Obligations will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC s practice is to credit Direct Participants accounts upon DTC s receipt of funds and corresponding detail information from the Issuer or the Paying Agent/Registrar, on the payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC nor its nominee, the Paying Agent/Registrar, or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Issuer or the Paying Agent/Registrar, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of the Participants. DTC may discontinue providing its services as securities depository with respect to the Obligations at any time by giving reasonable notice to the Issuer or the Paying Agent/Registrar. Under such circumstances, in the event that a successor securities depository is not obtained, Obligations are required to be printed and delivered to DTC Participants or the Beneficial Owners, as the case may be. The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the Issuer and the Underwriters believe to be reliable, but the Issuer, the Financial Advisors and the Underwriters take no responsibility for the accuracy thereof. Use of Certain Terms in Other Sections of this Official Statement In reading this Official Statement it should be understood that while the Obligations are in the Book-Entry-Only System, references in other sections of this Official Statement to registered owners should be read to include the person for which the Participant acquires an interest in the Obligations, but (i) all rights of ownership must be exercised through DTC and the Book- Entry-Only System, and (ii) except as described above, notices that are to be given to registered owners under the Ordinances will be given only to DTC. Effect of Termination of Book-Entry-Only System In the event that the Book-Entry-Only System is discontinued by DTC or the use of the Book-Entry-Only System is discontinued by the City, physical Obligations will be printed and delivered to the holders and the Obligations will be subject to transfer, exchange and registration provisions as set forth in the Ordinances and summarized under "REGISTRATION, TRANSFER AND EXCHANGE" above. INVESTMENT POLICIES The Issuer invests its investable funds in investments authorized by State law in accordance with investment policies approved by the City Council of the Issuer. Both State law and the Issuer's investment policies are subject to change. Legal Investment Under Texas law, the City is authorized to invest in (1) obligations, including letters of credit, of the United States or its agencies and instrumentalities, (2) direct obligations of the State of Texas or its agencies and instrumentalities, (3) collateralized mortgage obligations directly issued by a federal agency or instrumentality of the United States, the underlying security for which is guaranteed by an agency or instrumentality of the United States, (4) other obligations, the principal of and interest on which are unconditionally guaranteed or insured by, or backed by the full faith and credit of the State of Texas or the United States or their respective agencies and instrumentalities, (5) obligations of states, agencies, counties, cities, and other political subdivisions of any state rated as to investment quality by a nationally recognized investment rating firm not less than A or its equivalent, (6) (a) certificates of deposit and share certificates issued by a depository institution that has its main office or branch office in the State of Texas, that are guaranteed or insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund or their respective successors, or are secured as to principal by obligations described in clauses (1) through (5) and clause (13) or in any other manner and amount provided by law for City deposits, and in addition (b) the City is authorized, subject to certain conditions, to invest in certificates of deposit with a depository institution that has its main office or branch office in the State of Texas and that participates in the Certificate of Deposit Account Registry Service network (CDARS ) and as further provided by Texas law, (7) fully collateralized repurchase agreements that have a defined termination date, are fully secured by obligations described in clause (1) and require the security being purchased by the City to be pledged to the City, held in the City s name and deposited at the time the investment is made with the City or with a third party selected and approved by the City, and are placed through a primary government securities dealer or a financial institution doing business in the State of Texas, (8) bankers acceptances with the remaining term of 270 days or less from the date of issuance, if the short-term obligations of the accepting bank or its parent are rated at least A-1 or P-1 or the equivalent by at least one nationally recognized credit rating agency, (9) commercial paper with the remaining term of 270 days or less from the date of issuance that is rated at least A-1 or P-1 or the equivalent by at least (a) two nationally recognized credit rating agencies or (b) one nationally recognized credit rating agency if the paper is fully secured by an irrevocable letter of credit issued by a U.S. or state bank, (10) no-load money market mutual funds 14

15 registered with and regulated by the United States Securities and Exchange Commission that have a dollar weighted average portfolio maturity of 90 days or less and include in their investment objectives the maintenance of a stable net asset value of $1 for each share, (11) no-load mutual fund registered with the United States Securities and Exchange Commission that: have an average weighted maturity of less than two years; invest exclusively in obligations described in the preceding clauses and clauses (12) and (13), and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent, (12) public funds investment pools that have an advisory board which includes participants in the pool and are continuously rated as to investment quality by at least one nationally recognized investment rating firm of not less than AAA or its equivalent or no lower than investment grade with a weighted average maturity no greater than 90 days, and (13) bonds issued, assumed or guaranteed by the State of Israel. Texas law also permits the City to invest bond proceeds in a guaranteed investment contract subject to the limitations set forth in Chapter 2256, as amended, Texas Government Code. Entities such as the City may enter into securities lending programs if (i) the securities loaned under the program are 100% collateralized including accrued income, a loan made under the program allows for termination at any time and a loan made under the program is either secured by (a) obligations that are described in clauses (1) through (5) and clause (13) above, (b) pledged irrevocable letters of credit issued by a state or national bank that is continuously rated by a nationally recognized investment rating firm at not less than A or its equivalent or (c) cash invested in obligations described in clauses (1) through (5) and clause (13) above, clause (9) above and clauses (10) and (11) above, or an authorized investment pool; (ii) securities held as collateral under a loan are pledged to such investing entity or a third party designated by such investing entity; (iii) a loan made under the program is placed through either a primary government securities dealer or a financial institution doing business in the State of Texas; and (iv) the agreement to lend securities has a term of one year or less. The City may invest in such obligations directly or through government investment pools that invest solely in such obligations provided that the pool are rated no lower than AAA or AAAm or an equivalent by at least one nationally recognized rating service. The City is specifically prohibited from investing in: (1) obligations whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal; (2) obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security and bears no interest; (3) collateralized mortgage obligations that have a stated final maturity of greater than 10 years; and (4) collateralized mortgage obligations the interest rate of which is determined by an index that adjusts opposite to the changes in a market index. Under Texas law, the City may contract with an investment management firm registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to provide for the investment and management of its public funds or other funds under its control for a term up to two years, but the City retains ultimate responsibility as fiduciary of its assets. In order to renew or extend such a contract, the City must do so by order, Ordinance or resolutions. The City has not contracted with, and has no present intention of contracting with, any such investment management firm or the State Securities Board to provide such services. Investment Policies Under Texas law, the Issuer is required to invest its funds under written investment policies that primarily emphasize safety of principal and liquidity; that address investment diversification, yield, maturity, and the quality and capability of investment management; and that includes a list of authorized investments for Issuer funds, maximum allowable stated maturity of any individual investment owned by the Issuer and the maximum average dollar-weighted maturity allowed for pooled fund groups. All Issuer funds must be invested consistent with a formally adopted Investment Strategy Statement that specifically addresses each fund s investment. Each Investment Strategy Statement will describe its objectives concerning: (1) suitability of investment type, (2) preservation and safety of principal, (3) liquidity, (4) marketability of each investment, (5) diversification of the portfolio, and (6) yield. Under Texas law, Issuer investments must be made with judgment and care, under prevailing circumstances, that a person of prudence, discretion, and intelligence would exercise in the management of the person s own affairs, not for speculation, but for investment, considering the probable safety of capital and the probable income to be derived. At least quarterly the investment officers of the Issuer shall submit an investment report detailing: (1) the investment position of the Issuer, (2) that all investment officers jointly prepared and signed the report, (3) the beginning market value, any additions and changes to market value and the ending value of each pooled fund group, (4) the book value and market value of each separately listed asset at the beginning and end of the reporting period, (5) the maturity date of each separately invested asset, (6) the account or fund or pooled fund group for which each individual investment was acquired, and (7) the compliance of the investment portfolio as it relates to: (a) adopted investment strategy statements and (b) state law. No person may invest Issuer funds without express written authority from the City Council. Additional Provisions Under Texas law, the Issuer is additionally required to: (1) annually review its adopted policies and strategies, (2) adopt a rule, order, ordinance or resolution stating that it has reviewed its investment policy and investment strategies and records any changes made to either its investment policy or investment strategy in the respective rule, order, ordinance or resolution, (3) require any investment officers with personal business relationships or relatives with firms seeking to sell securities to the entity to disclose the relationship and file a statement with the Texas Ethics Commission and the City Council; (4) require the qualified representative of firms offering to engage in an investment transaction with the Issuer to: (a) receive and review the Issuer s investment policy, (b) acknowledge that reasonable controls and procedures have been implemented to preclude investment transactions conducted between the Issuer and the business organization that are not authorized by the Issuer s investment policy (except to the extent that this authorization is dependent on an analysis of the makeup of the Issuer s entire portfolio or requires an interpretation of subjective investment standards), and (c) deliver a written statement in a form acceptable to the Issuer and the business organization attesting to these requirements; (5) perform an annual audit of the management controls on investments and adherence to the Issuer s investment policy; (6) provide specific investment training for the Finance Director and investment officers; (7) restrict reverse repurchase agreements to not more than 90 days and restrict the investment of reverse repurchase agreement funds to no greater than the term of the reverse purchase agreement; (8) restrict the investment in no load market mutual funds in the aggregate to no more than 15% of the Issuer s monthly average fund balance, excluding bond proceeds and reserves and other funds held for debt service; (9) require local government investment pools to conform to the new disclosure, rating, net asset value, yield calculation, and advisory board requirements, and (10) at least annually review, revise, and adopt a list of qualified brokers that are authorized to engage in investment transactions with the Issuer. 15

16 Current Investments (1) TABLE 1 As of January 31, 2015, the City had the following investments: Type of Security Fair Value Percentage of Total Municipal Bonds $ 11,964, % TexPool 43,920, % Certificates of Deposit 1,469, % MBIA Class 83, % JPMorgan Chase 2,526, % $59,964, % As of such date, the market value of such investments (as determined by the Issuer by reference to published quotations, dealer bids, and comparable information) was approximately 100% of their book value. No funds of the Issuer are invested in derivative securities, i.e., securities whose rate of return is determined by reference to some other instrument, index, or commodity. (1) Unaudited. Property Tax Code and County-Wide Appraisal District AD VALOREM TAX PROCEDURES The Texas Property Tax Code (the "Tax Code ") provides for county-wide appraisal and equalization of taxable property values and establishes in each county of the State of Texas an appraisal district and an appraisal review board responsible for appraising property for all taxable units within the county. The Comal County Appraisal District (the "Appraisal District") is responsible for appraising property within the City generally as of January 1 of each year. (A small portion of the City lies within Guadalupe County, Texas. The Central Appraisal District of Guadalupe County appraises such property and acts in a manner similar to what is described herein with respect to the Comal County Appraisal District.) The appraisal values set by the Appraisal District are subject to review and change by the Comal County Review Board (the Appraisal Review Board ) which is appointed by the Appraisal District. Such appraisal rolls, as approved by the Appraisal Review Board, are used by the Issuer in establishing its tax roll and tax rate. Property Subject to Taxation by the Issuer Except for certain exemptions provided by Texas law, all real and certain tangible personal property with a tax situs in the City are subject to taxation by the City. Principal categories of exempt property (including certain exemptions which are subject to local option by the City Council) include property owned by the State of Texas or its political subdivisions if the property is used for public purposes; property exempt from ad valorem taxation by federal law; certain improvements to real property and certain tangible personal property located in designated reinvestment zones on which the Issuer has agreed to abate ad valorem taxes, certain household goods, family supplies and personal effects; farm products owned by the producers; certain property of a nonprofit corporation used in scientific research and educational activities benefiting a college or university, and designated historical sites. Other principal categories of exempt property include tangible personal property not held or used for production of income, solar and wind-powered energy devices; most individually owned automobiles; certain varying amounts of valuation attributable to residential homesteads of disabled persons or persons ages 65 or over and property of disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; and certain classes of intangible property. Owners of agricultural and open space land, under certain circumstances, may request valuation of such land on the basis of productive capacity rather than market value. At an election held on September 13, 2003, the voters of the State of Texas approved a constitutional amendment authorizing counties, cities, towns or junior college districts to establish an ad valorem tax freeze on residence homesteads of the disabled and persons sixty-five years of age or older. The surviving spouse of a taxpayer who qualifies for the freeze on ad valorem taxes is entitled to the same exemption so long as (i) the taxpayer died in a year in which he qualified for the exemption, (ii) the surviving spouse was at least 55 years of age when the taxpayer died, and (iii) the property was the residence homestead of the surviving spouse when the taxpayer died and the property remains the residence homestead of the surviving spouse. This tax freeze can be implemented by official action of a governing body, or pursuant to an election called by the governing body upon receipt of a petition signed by 5% of registered voters of the municipality. The City has implemented this tax freeze pursuant to an ordinance authorized by the City Council on November 15, Valuation of Property for Taxation Generally, property in the City must be appraised by the Appraisal District at market value as of January 1 of each year. Once an appraisal roll is prepared and finally approved by the Appraisal Review Board, it is used by the Issuer in establishing its tax rolls and tax rate. Assessments under the Tax Code are to be based on one hundred percent (100%) of market value, except as described below, and no assessment ratio can be applied. State law requires the appraised value of a residence homestead to be based solely on the property s value as a residence homestead, regardless of whether residential use is considered to be the highest and best use of the property. State law further limits the appraised value of a residence homestead for a tax year to an amount not to exceed the lesser of (1) the market value of the property or (2) the sum of (a) 10% of the appraised value of the property for the last year in which the property was appraised for taxation times the number of years since the property was last appraised, plus (b) the appraised value of the property for the last year in which the property was appraised plus (c) the market value of all new improvements to the property. 16

17 Article VIII of the Texas Constitution and the Tax Code permits land designated for agricultural use (Section 1-d), open space or timberland (Section 1-d-1) to be appraised at the lesser of its value based on the land's capacity to produce agricultural or timber products or its market value. Landowners wishing to avail themselves of the agricultural use designation must apply for the designation, and the appraiser is required by the Tax Code to act on each claimant's right to the designation individually. If a claimant receives the agricultural use designation and later loses it by changing the use of the property or selling it to an unqualified owner, the Issuer can collect taxes based on the new value, including three (3) years for agricultural use and five (5) years for agricultural open space land and timberland prior to the loss of the designation. The same land may not be qualified under both Section 1-d and 1-d-1. The Tax Code requires the Appraisal District to implement a plan for periodic reappraisal of property to update appraisal values. The plan must provide for appraisal of all real property in the Appraisal District at least once every three (3) years. The Issuer, at its expense, has the right to obtain from the Appraisal District a current estimate of appraised values within the City or an estimate of any new property or improvements within the City. While such current estimate of appraised values may serve to indicate the rate and extent of growth of taxable values within the City, it cannot be used for establishing a tax rate within the City until such time as the Appraisal District chooses to formally include such values on its appraisal roll. Residential Homestead Exemptions Under Section 1-b, Article VIII of the Texas Constitution, and State law, the governing body of a political subdivision, at its option, may grant: 1. An exemption of not less than $3,000 of the market value of the residence homestead of persons 65 years of age or older and the disabled from all ad valorem taxes thereafter levied by the political subdivision. The Issuer has elected to grant a $3,750 exemption for persons 65 years of age or older. 2. An exemption of up to 20% of the market value of residence homesteads; minimum exemption $5,000. The Issuer has elected to grant an exemption equal to 20% of market value of residence homesteads with a minimum exemption of $5,000. In the case of residence homestead exemptions granted under Section 1-b, Article VIII, ad valorem taxes may continue to be levied against the value of homesteads exempted where ad valorem taxes have previously been pledged for the payment of debt if cessation of the levy would impair the obligation of the contract by which the debt was created. State law and Section 2, Article VIII, mandate an additional property tax exemption for disabled veterans or the surviving spouse or children of a deceased veteran who died while on active duty in the armed forces; the exemption applies to either real or personal property with the amount of assessed valuation exempted ranging from $5,000 to a maximum of $12,000. A disabled veteran who receives from the United States Department of Veterans Affairs or its successor 100% disability compensation due to a service-connected disability and a rating of 100% disabled or of individual unemployability is entitled to an exemption from taxation of the total appraised value of the veteran's residence homestead. Furthermore, following the approval by the voters at a November 8, 2011 statewide election, effective January 1, 2012, the surviving spouses of a deceased veteran who had received a disability rating of 100% is entitled to receive a residential homestead exemption equal to the exemption received by the deceased spouse until such surviving spouse remarries Following the approval by the voters at a November 5, 2013 statewide election, a partially disabled veteran or the surviving spouse of a partially disabled veteran is entitled to an exemption equal to the percentage of the veteran s disability, if the residence was donated at no cost to the veteran by a charitable organization. Also approved by the November 5, 2013 election was a constitutional amendment providing that the surviving spouse of a member of the armed forces who is killed in action is entitled to a property tax exemption for all or part of the market value of such surviving spouse s residence homestead, if the surviving spouse has not remarried since the service member s death and said property was the service member s residence homestead at the time of death. Such exemption is transferable to a different property of the surviving spouse, if the surviving spouse has not remarried, in an amount equal to the exemption received on the prior residence in the last year in which such exemption was received. Freeport Goods Exemption Article VIII, Section 1-j of the Texas Constitution provides for an exemption from ad valorem taxation for freeport property, which is defined as goods detained in the state for 175 days or less for the purpose of assembly, storage, manufacturing, processing or fabrication. Taxing units that took action prior to April 1, 1990 may continue to tax freeport property and decisions to continue to tax freeport property may be reversed in the future. However, decisions to exempt freeport property are not subject to reversal. The City does not tax freeport property. In addition, Article VIII, Section 1-n of the Texas Constitution provides for an exemption from taxation for "goods-in-transit", which are defined as personal property acquired or imported into the state and transported to another location inside or outside the state within 175 days of the date the property was acquired or imported into the state. The exemption excludes oil, natural gas, petroleum products, aircraft and special inventory, including motor vehicle, vessel and out-board motor, heavy equipment and manufactured housing inventory. After holding a public hearing, a taxing unit may take action by January 1 of the year preceding a tax year to tax goods-in-transit during the following tax year. A taxpayer may obtain only a freeport exemption or a goods-in-transit exemption for items of personal property. Senate Bill 1, passed by the 82 nd Texas Legislature, 1 st Called Session, requires that the governmental entities take affirmative action prior to December 31, 2011 to continue its taxation of goods-in-transit in the 2012 tax year and beyond. On November 28, 2011, the City Council took official action to again tax goods-in-transit for the year 2012 and beyond. Tax Investment Financing/Tax Abatement/Economic Development Program Tax Increment Reinvestment (Financing) Zones: The City, by action of the City Council, may create one or more tax increment reinvestment zones ( TIRZs or TIFs ) within the City, and in doing so, other overlapping taxing entities may agree to contribute taxes levied against the Incremental Value in the TIRZ to finance or pay for public improvements or projects within the TIRZ. At the time of the creation of the TIRZ, a base value for the real property in the TIRZ is established and the difference between 17

18 any increase in the assessed valuation of taxable real property in the TIRZ in excess of the base value of taxable real property in the TIRZ is known as the Incremental Value, and during the existence of the TIRZ, all or a portion (as determined by the City) of the taxes levied by the City against the Incremental Value in the TIRZ are restricted to paying project and financing costs within the TIRZ and are not available for the payment of other obligations of the City. On May 29, 2007, the City Council authorized an ordinance creating a TIRZ that totaled 497 acres with a taxable base value of $4,985,170 and a current taxable value of $240,207,568, and for a period of 25 years, ending December 31, Tax Abatement Agreements: The City also may enter into tax abatement agreements to encourage economic development. Under the agreements, a property owner agrees to construct certain improvements on its property. The City, in turn, agrees not to levy a tax on all or part of the increased value attributable to the improvements until the expiration of the agreement. The abatement agreement could last for a period of up to 10 years. The City currently has no tax abatement agreements in place. Economic Development Programs of Grants and Loans: The City is authorized, pursuant to Chapter 380, Texas Local Government Code ( Chapter 380 ) to establish programs to promote state or local economic development and to stimulate business and commercial activity in the City. In accordance with a program established pursuant to Chapter 380, the City may make loans or grants of public funds for economic development purposes; however, no obligations secured by ad valorem taxes may be issued for such purposes unless approved by voters of the City. The City has Chapter 380 Agreements with Hill County Furniture, HD Supply and Westpoint Village and reviews proposals on a case by case basis. The Hill Country Furniture Agreement allows for a 50% rebate of the City s local sales tax rate and 50% of the Industrial Development Corporation ( IDC ) Sales Tax Rate up to an amount not to exceed $28,900,000. The HD Supply Agreement allows for a rebate of 50% of the IDC Sales Tax Rate for a term of up to 20 years. The Westpoint Village Agreement allows for a rebate of 50% of the IDC Sales Tax Rate up to an amount not to exceed $4,117,000. Issuer and Taxpayer Remedies Under certain circumstances, taxpayers and taxing units, including the Issuer, may appeal the orders of the Appraisal Review Board by filing a timely petition for review in district court within 45 days after notice is received that a final order has been entered. In such event, the property value in question may be determined by the court, or by a jury, if requested by any party, or through binding arbitration, if requested by the taxpayer. Additionally, taxing units may bring suit against the Appraisal District to compel compliance with the Tax Code. The Tax Code sets forth notice and hearing procedures for certain tax rate increases by the Issuer and provides for taxpayer referenda that could result in the repeal of certain tax increases. The Tax Code also establishes a procedure for notice to property owners of reappraisals reflecting increased property value, appraisals which are higher than renditions, and appraisals of property not previously on an appraisal role. The Financial Institutions Act of 1989 The "Financial Institutions Reform, Recovery and Enforcement Act of 1989" ("FIRREA"), provides that real property held by the Federal Deposit Insurance Corporation ( FDIC ) is still subject to ad valorem taxation, but that (i) no real property of the FDIC shall be subject to foreclosure or sale without the consent of the FDIC and no involuntary lien shall attach to such property, (ii) the FDIC shall not be liable for any penalties or fines, including those arising from the failure to pay any real property tax when due, (iii) no personal property owned by FDIC is subject to ad valorem taxation, and (iv) notwithstanding failure of a person to challenge an appraisal in accordance with State law, such value shall be determined as of the period for which such tax is imposed. As of the date hereof, the Issuer is not aware of any significant properties in the City which are under the control of the FDIC, however, real property could come under their control while acting as the receiver of an insolvent financial institution. Accordingly, to the extent the FIRREA provisions are valid and applicable to property in the City, and to the extent that the FDIC attempts to enforce the same, the provisions may affect the time at which the Issuer can collect taxes on property owned by the FDIC, if any, in the City. Levy and Collection of Taxes The Issuer is responsible for the levy and collection of its taxes unless it elects to transfer such functions to another governmental entity. Before the later of September 30 th or the 60 th day after the date the certified appraisal roll is received by the taxing unit, the rate of taxation is set by the Issuer based upon the valuation of property within the City as of the preceding January 1. Taxes are due October 1, or when billed, whichever comes later, and become delinquent after January 31 of the following year. A delinquent tax incurs a penalty of six percent (6%) of the amount of the tax for the first calendar month it is delinquent, plus one percent (1%) for each additional month or portion of a month the tax remains unpaid prior to July 1 of the year in which it becomes delinquent. If the tax is not paid by July 1 of the year in which it becomes delinquent, the tax incurs a total penalty of twelve percent (12%) regardless of the number of months the tax has been delinquent and incurs an additional penalty of up to twenty percent (20%) if imposed by the Issuer. The delinquent tax also accrues interest at a rate of one percent (1%) for each month or portion of a month it remains unpaid. The Tax Code also makes provision for the split payment of taxes, discounts for early payment and the postponement of the delinquency date of taxes under certain circumstances. The Issuer does not allow split payments or discounts. Issuer's Rights in the Event of Tax Delinquencies Taxes levied by the Issuer are a personal obligation of the owner of the property as of January 1 of the year for which the tax is imposed. On January 1 of each year, a tax lien attaches to property to secure the payment of all state and local taxes, penalties, and interest ultimately imposed for the year on the property. The lien exists in favor of the State of Texas and each local taxing unit, including the Issuer, having power to tax the property. The Issuer's tax lien is on a parity with tax liens of such other taxing units. A tax lien on real property takes priority over the claim of most creditors and other holders of liens on the property encumbered by the tax lien, whether or not the debt or lien existed before the attachment of the tax lien; however, whether a lien of the United States is on a parity with or takes priority over a tax lien of the Issuer is determined by applicable federal law. Personal property, under certain circumstances, is subject to seizure and sale for the payment of delinquent taxes, penalty, and interest. 18

19 At any time after taxes on property become delinquent, the Issuer may file suit to foreclose the lien securing payment of the tax, to enforce personal liability for the tax, or both. In filing a suit to foreclose a tax lien on real property, the Issuer must join other taxing units that have claims for delinquent taxes against all or part of the same property. Collection of delinquent taxes may be adversely affected by the amount of taxes owed to other taxing units, by the effects of market conditions on the foreclosure sale price, by taxpayer redemption rights (a taxpayer may redeem property within two (2) years after the purchaser's deed issued at the foreclosure sale is filed in the City records) or by bankruptcy proceedings which restrict the collection of taxpayer debts. Federal bankruptcy law provides that an automatic stay of actions by creditors and other entities, including governmental units, goes into effect with the filing of any petition in bankruptcy. The automatic stay prevents governmental units from foreclosing on property and prevents liens for post-petition taxes from attaching to property and obtaining secured creditor status unless, in either case, an order lifting the stay is obtained from the bankruptcy court. In many cases, post-petition taxes are paid as an administrative expense of the estate in bankruptcy or by order of the bankruptcy court. TAX RATE LIMITATIONS Article XI, Section 5 of the Texas Constitution, applicable to cities of more than 5,000 population: $2.50 per $100 assessed valuation. The Issuer has adopted a Home Rule Charter which does not limit the City s maximum tax rate limit beyond the Constitutional limit of $2.50 per $100 of assessed valuation for all Issuer purposes. No direct funded debt limitation is imposed on the City under current Texas law. No direct funded debt limitation is imposed on the City under current Texas law. Article XI, Section 5 of the Texas Constitution is applicable to the City, and limits its maximum ad valorem tax rate to $2.50 per $100 assessed valuation for all City purposes. As stated above, the City operates under a Home Rule Charter which adopts a limit of $2.50 per $100 of assessed valuation. The Texas Attorney General has adopted an administrative policy that generally prohibits the issuance of debt by a municipality, such as the City, if its issuance produces debt service requirements exceeding that which can be paid from $1.50 of the foregoing $2.50 maximum tax rate calculated at 90% collection. The issuance of the Obligations does not violate this Constitutional provision or the Texas Attorney General's administrative policy. Before the later of September 30 th or the 60 th day after the date the certified appraisal roll is received by the taxing unit, the City Council must adopt a tax rate per $100 taxable value for the current year. The tax rate consists of two components: (1) a rate for funding of maintenance and operation expenditures, and (2) a rate for debt service. The Tax Code The City must annually calculate and publicize its effective tax rate and rollback tax rate. The City Council may not adopt a tax rate that exceeds the lower of the rollback rate or the effective tax rate until it has held two public hearings on the proposed increase following notice to the taxpayers and otherwise complied with the Tax Code. If the adopted tax rate exceeds the rollback tax rate, the qualified voters of the City, by petition, may require that an election be held to determine whether or not to reduce the tax rate adopted for the current year to the rollback tax rate. Effective tax rate means the rate that will produce last year s total tax levy (adjusted) from this year s total taxable values (adjusted). Adjusted means lost values are not included in the calculation of last year s taxes and new values are not included in this year s taxable values. Rollback tax rate means the rate that will produce last year s maintenance and operation tax levy (adjusted) from this year s values (unadjusted) multiplied by 1.08 plus a rate that will produce this year s debt service from this year s values (adjusted) divided by the anticipated tax collection rate. Reference is made to the Tax Code for definitive requirements for the levy and collection of ad valorem taxes and the calculation of the various defined tax rates. The Tax Code provides certain cities and counties in the State the option of assessing a maximum one-half percent (1/2%) sales tax on retail sales of taxable items for the purpose of reducing its ad valorem taxes, if approved by a majority of the voters in a local option election. If the additional tax is approved and levied, the ad valorem property tax levy must be reduced by the amount of the estimated sales tax revenues to be generated in the current year. Further, the Tax Code provides certain cities the option of assessing a maximum one-half percent (1/2%) sales tax on retail sales of taxable items for economic development purposes, if approved by a majority of the voters in a local option election. The Issuer has authorized the additional sales tax for economic development at the rate of 3/8%. Tax Exemption TAX MATTERS The delivery of the Obligations is subject to separate opinions of Norton Rose Fulbright US LLP of San Antonio, Texas ( Bond Counsel ), to the effect that interest on the Obligations for federal income tax purposes under existing statutes, regulations, published rulings and court decisions (1) will be excludable from the gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date of initial delivery of the Obligations (the Code ), of the owners thereof pursuant to section 103 of the Code and (2) will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals or, except as hereinafter described, corporations. The statute, regulations, rulings and court decisions on which such opinion will be based are subject to change. Forms of Bond Counsel s opinions appear in APPENDIX C attached hereto. Interest on all tax exempt obligations, including the Obligations, owned by a corporation will be included in such corporation s adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation, other than an S corporation, a qualified mutual fund, a real estate investment trust (REIT), a financial asset securitization investment trust (FASIT), or a real estate mortgage investment conduit (REMIC). A corporation s alternative minimum taxable income is the basis on which the alternative minimum tax imposed by section 55 of the Code will be computed. 19

20 In rendering the foregoing opinions, Bond Counsel will rely upon (with respect to the Obligations) the Report of the Verification Agents, regarding the sufficiency of the deposit to the Escrow Fund on the date of closing (see OTHER PERTINENT INFORMATION Verification of Arithmetical and Mathematical Computations herein) and upon the representations and certifications of the City pertaining to the use, expenditure and investment of the proceeds of the Obligations and will assume continuing compliance with the provisions of the Ordinances by the City subsequent to the issuance of the Obligations. Each Ordinance contains covenants by the City with respect to, among other matters, the use of the proceeds of the Obligations and the facilities financed or refinanced therewith by persons other than state or local governmental units, the manner in which the proceeds of the Obligations are to be invested and the reporting of certain information to the United States Treasury. Failure to comply with any of these covenants may cause interest on the Obligations to be includable in the gross income of the owner thereof for federal income taxes from the date of the issuance of the Obligations. Except as described above, Bond Counsel will express no other opinion with respect to any other federal, state or local tax consequences under present law, or proposed legislation, resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Obligations. Bond Counsel s opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, published rulings and court decisions and the representations and covenants of the City described above. No ruling has been sought from the Internal Revenue Service (the Service ) with respect to the matters addressed in the opinion of Bond Counsel, and Bond Counsel s opinion is not binding on the Service. The Service has an ongoing program of auditing the tax-exempt status of the interest on municipal obligations. If an audit of the Obligations is commenced, under current procedures the Service is likely to treat the City as the taxpayer, and the Beneficial Owners would have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest on the Obligations, the City may have different or conflicting interests from the Beneficial Owners. Public awareness of any future audit of the Obligations could adversely affect the value and liquidity of the Obligations during the pendency of the audit, regardless of its ultimate outcome. Tax Changes Existing law may change to reduce or eliminate the benefit to bondholders of the exclusion of interest on the Obligations from gross income for federal income tax purposes. Any proposed legislation or administrative action, whether or not taken, could also affect the value and marketability of the Obligations. Prospective purchasers of the Obligations should consult with their own tax advisors with respect to any proposed or future changes in tax law. Ancillary Tax Consequences Prospective purchasers of the Obligations should be aware that the ownership of tax-exempt obligations such as the Obligations may result in collateral federal tax consequences to, among others, financial institutions, property and casualty insurance companies, life insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, owners of an interest in a FASIT, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, taxexempt obligations. Prospective purchasers should consult their own tax advisors as to the applicability of these consequences to their particular circumstances. Tax Accounting Treatment of Discount Obligations The initial public offering price to be paid for certain Obligations may be less than the amount payable on such Obligations at maturity (the Discount Obligations ). An amount equal to the difference between the initial public offering price of a Discount Obligation (assuming that a substantial amount of the Discount Obligations of that maturity are sold to the public at such price) and the amount payable at maturity constitutes original issue discount to the initial purchaser of such Discount Obligations. A portion of such original issue discount, allocable to the holding period of a Discount Obligation by the initial purchaser, will be treated as interest for federal income tax purposes, excludable from gross income on the same terms and conditions as those for other interest on the Obligations. Such interest is considered to be accrued actuarially in accordance with the constant interest method over the life of a Discount Obligation, taking into account the semiannual compounding of accrued interest, at the yield to maturity on such Discount Obligation and generally will be allocated to an initial purchaser in a different amount from the amount of the payment denominated as interest actually received by the initial purchaser during his taxable year. However, such accrued interest may be required to be taken into account in determining the alternative minimum taxable income of a corporation, for purposes of calculating a corporation s alternative minimum tax imposed by section 55 of the Code, and the amount of the branch profits tax applicable to certain foreign corporations doing business in the United States, even though there will not be a corresponding cash payment. In addition, the accrual of such interest may result in certain other collateral federal income tax consequences to, among others, financial institutions, property and casualty insurance companies, life insurance companies, S corporations with subchapter C earnings and profits, owners of an interest in a FASIT, individual recipients of Social Security or Railroad Retirement benefits, individuals otherwise qualifying for the earned income tax credit, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. In the event of the sale or other taxable disposition of a Discount Obligation prior to maturity, the amount realized by such owner in excess of the basis of such Discount Obligation in the hands of such owner (adjusted upward by the portion of the original issue discount allocable to the period for which such Discount Obligation was held) is includable in gross income. Owners of Discount Obligations should consult with their own tax advisors with respect to the determination for federal income tax purposes of accrued interest upon disposition of Discount Obligations and with respect to the state and local tax consequences of owning Discount Obligations. It is possible that, under applicable provisions governing determination of state and local income taxes, accrued interest on the Discount Obligations may be deemed to be received in the year of accrual even though there will not be a corresponding cash payment. 20

21 Tax Accounting Treatment of Premium Obligations The initial public offering price to be paid for certain Obligations may be greater than the stated redemption price on such Obligations at maturity (the Premium Obligations ). An amount equal to the difference between the initial public offering price of a Premium Obligation (assuming that a substantial amount of the Premium Obligations of that maturity are sold to the public at such price) and its stated redemption price at maturity constitutes premium to the initial purchaser of such Premium Obligations. The basis for federal income tax purposes of a Premium Obligation in the hands of such initial purchaser must be reduced each year by the amortizable bond premium, although no federal income tax deduction is allowed as a result of such reduction in basis for amortizable bond premium with respect to the Premium Obligations. Such reduction in basis will increase the amount of any gain (or decrease the amount of any loss) to be recognized for federal income tax purposes upon a sale or other taxable disposition of a Premium Obligation. The amount of premium which is amortizable each year by an initial purchaser is determined by using such purchaser s yield to maturity. Purchasers of the Premium Obligations should consult with their own tax advisors with respect to the determination of amortizable bond premium on Premium Obligations for federal income tax purposes and with respect to the state and local tax consequences of owning and disposing of Premium Obligations. CONTINUING DISCLOSURE OF INFORMATION In the respective Ordinances, the City has made the following agreement for the benefit of the holders and Beneficial Owners of the Obligations. The City is required to observe the agreement for so long as it remains obligated to advance funds to pay the Obligations. Under these agreements, the City will be obligated to provide certain updated financial information and operating data annually, and timely notice of certain specified events, to the Municipal Securities Rulemaking Board (the MSRB ). The information provided to the MSRB will be available to the public free of charge via the Electronic Municipal market Access ( EMMA ) system through an internet website accessible at as described below under Availability of Information. Annual Reports Under Texas law, including, but not limited to Chapter 103, as amended, Texas Government Code, the City must keep its fiscal records in accordance with generally accepted accounting principles, must have its financial accounts and records audited by a certified public accountant and must maintain each audit report within 180 days after the close of the City s fiscal year. The City s fiscal records and audit reports are available for public inspection during the regular business hours, and the City is required to provide a copy of the City s audit reports to any certificate holder or other member of the public within a reasonable time of request to City Secretary, PO Box , New Braunfels, Texas , and upon payment of charges prescribed by the Texas General Services Commission. The City will file certain updated financial information and operating data with the MSRB. The information to be updated includes all quantitative financial information and operating data with respect to the City of the general type included in this Official Statement in Table 1 hereof, Tables 1 through 9 of Appendix A to this Official Statement, and in Appendix D. The City will update and provide this information within six months after the end of each fiscal year ending in and after The financial information and operating data to be provided may be set forth in full in one or more documents or may be included by specific reference to any document available to the public on the MSRB s EMMA Internet Web site or filed with the United States Securities and Exchange Commission (the SEC ), as permitted by SEC Rule 15c2-12 (the Rule ). The updated information will include audited financial statements, if the City commissions an audit and it is completed by the required time. If audited financial statements are not available by the required time, the City will provide unaudited financial statements by the required time and audited financial statements when and if such audited financial statements become available. Any such financial statements will be prepared in accordance with the accounting principles described in Appendix D or such other accounting principles as the City may be required to employ from time to time pursuant to State law or regulation. The City s current fiscal year end is September 30. Accordingly, it must provide updated information by March 31 in each year, unless the City changes its fiscal year. If the City changes its fiscal year, it will file notice of the change with the MSRB. Notice of Certain Events The City will file with the MSRB notice of any of the following events with respect to the Obligations to the MSRB in a timely manner (but not in excess of ten business days after the occurrence of the event): (1) principal and interest payment delinquencies; (2) non-payment related defaults, if material; (3) unscheduled draws on debt service reserves reflecting financial difficulties; (4) unscheduled draws on credit enhancements reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB), or other material notices or determinations with respect to the tax status of the Obligations, or other material events affecting the tax status of the Obligations, as the case may be; (7) modifications to rights of holders of the Obligations, if material; (8) Bond or Certificate calls, if material, and tender offers; (9) defeasances; (10) release, substitution, or sale of property securing repayment of the Obligations, if material; (11) rating changes; (12) bankruptcy, insolvency, receivership, or similar event of the City, which shall occur as described below; (13) the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of its assets, other than in the ordinary course of business, the entry into of a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; and (14) appointment of a successor or additional paying agent/registrar or the change of name of a paying agent/registrar, if material. Neither the Obligations or the Ordinances make any provision for debt service reserves, credit enhancement, or liquidity enhancement. In addition, the City will provide timely notice of any failure by the City to provide information, data, or financial statements in accordance with its agreement described above under Annual Reports. The City will provide each notice described in this paragraph to the MSRB. 21

22 For these purposes, any event described in clause (12) in the immediately preceding paragraph is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the City in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the City, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the City. Availability of Information Effective July 1, 2009, the SEC implemented amendments to the Rule which approved the establishment by the MSRB of EMMA, which is now the sole successor to the national municipal securities information repositories with respect to filings made in connection with undertakings made under the Rule. All information and documentation filing required to be made by the City in accordance with its undertaking made for the Obligations will be made with the MSRB in electronic format in accordance with MSRB guidelines. Access to such filings will be provided, without charge to the general public, by the MSRB. With respect to debt of the City issued prior to the EMMA Effective Date, the City remains obligated to make annual required filings, as well as notices of material events, under its continuing disclosure obligations relating to those debt obligations (which includes a continuing obligation to make such filings with the Texas state information depository (the SID )). Prior to EMMA Effective Date, the Municipal Advisory Council of Texas (the MAC ) had been designated by the State and approved by the SEC staff as a qualified SID. Subsequent to the EMMA Effective Date, the MAC entered into a Subscription Agreement with the MSRB pursuant to which the MSRB makes available to the MAC, in electronic format, all Texas-issuer continuing disclosure documents and related information posted to EMMA s website simultaneously with such posting. Until the City receives notice of a change in this contractual agreement between the MAC and EMMA or of a failure of either party to perform as specified thereunder, the City has determined, in reliance on guidance from the MAC, that making its continuing disclosure filings solely with the MSRB will satisfy its obligations to make filings with the SID pursuant to its continuing disclosure agreements entered into prior to the EMMA Effective Date. Limitations and Amendments The City has agreed to update information and to provide notices of certain specified events only as described above. The City has not agreed to provide other information that may be relevant or material to a complete presentation of its financial results of operations, condition, or prospects or agreed to update any information that is provided, except as described above. The City makes no representation or warranty concerning such information or concerning its usefulness to a decision to invest in or sell Obligations at any future date. The City disclaims any contractual or tort liability for damages resulting in whole or in part from any breach of its agreement or from any statement made pursuant to its agreement, although holders or beneficial owners of Obligations may seek a writ of mandamus to compel the City to comply with its agreement. The City may amend its continuing disclosure agreement to adapt to changed circumstances that arise from a change in legal requirements, a change in law, or a change in the identity, nature, status, or type of operations of the City, if the agreement, as amended, would have permitted an underwriter to purchase or sell Obligations in the offering described herein in compliance with the Rule and either the holders of a majority in aggregate principal amount of the outstanding Obligations consent or any person unaffiliated with the City (such as nationally recognized bond counsel) determines that the amendment will not materially impair the interests of the holders or beneficial owners of the Obligations. If the City amends its agreement, it must include with the next financial information and operating data provided in accordance with its agreement described above under Annual Reports an explanation, in narrative form, of the reasons for the amendment and of the impact of any change in the type of information and data provided. The City may also amend or repeal the provisions of this continuing disclosure agreement if the SEC amends or repeals the applicable provision of the Rule or a court of final jurisdiction enters judgment that such provisions of the Rule are invalid, but only if and to the extent that the provisions of this sentence would not prevent an underwriter from lawfully purchasing or selling Obligations, respectively, in the primary offering of the Obligations. Compliance with Prior Agreements During the past five years, the City has complied in all material respects with its previous continuing disclosure agreements made in accordance with the Rule. However, when Moody s Investors Service, Inc. ( Moody s ) upgraded the City s unenhanced debt rating from A1 to Aa2 on April 23, 2010 as a result of the recalibration of its municipal ratings the City did not file the upgrade with EMMA because it believed that it was filed by Moody s. During the City s past offerings the City incorrectly stated that it had filed the Moody s recalibrating upgrade on August 2, 2010 when, in fact, it did not. The City s unenhanced credit rating of Aa2 has been in place since April 23, On May 29, 2014, the City filed an event notice relating to its failure to file in 2010 and actually filed the Moody s rating upgrade through EMMA. (See OTHER PERTINENT INFORMATION Ratings herein.) LEGAL MATTERS Legal Opinions and No-Litigation Certificate The Issuer will furnish the Underwriters with complete transcripts of proceedings incident to the authorization and issuance of the Obligations, including the unqualified approving legal opinions of the Attorney General of the State of Texas to the effect that the Initial Obligations are valid and legally binding obligations of the Issuer, and based upon examination of such transcripts of proceedings, the approval of certain legal matters by Bond Counsel, to the effect that the Obligations, issued in compliance with the provisions of the applicable Ordinance, are valid and legally binding obligations of the Issuer and, subject to the qualifications set forth herein under "TAX MATTERS", the interest on the Obligations is exempt from federal income taxation under existing statutes, published rulings, regulations, and court decisions. In its capacity as Bond Counsel, Norton Rose Fulbright LLP of San Antonio, Texas, has reviewed the information under the captions THE BONDS, THE CERTIFICATES (except under the subcaption Use of Certificate Proceeds as to which no opinion is expressed), THE OBLIGATIONS (except under the subcaptions 22

23 Payment Record, Default and Remedies and Notices while in the Book-Entry-Only System, as to which no opinion is expressed), REGISTRATION, TRANSFER AND EXCHANGE, TAX RATE LIMITATIONS (first paragraph only), TAX MATTERS, CONTINUING DISCLOSURE OF INFORMATION (except under the subcaption Compliance with Prior Undertakings as to which no opinion is expressed), LEGAL MATTERS Legal Investments and Eligibility to Secure Public Funds in Texas, and OTHER PERTINENT INFORMATION Registration and Qualification of Obligations for Sale in the Official Statement and such firm is of the opinion that the information relating to the Obligations and the Ordinances contained under such captions is a fair and accurate summary of the information purported to be shown and that the information and descriptions contained under such captions relating to the provisions of applicable state and federal laws are correct as to matters of law. Though it represents the Financial Advisor and the Underwriters from time to time in matters unrelated to the issuance of the Obligations, Bond Counsel has been engaged by and only represents the City in connection with the issuance of the Obligations. The customary closing papers, including a certificate to the effect that no litigation of any nature has been filed or is then pending to restrain the issuance and delivery of the Obligations or which would affect the provision made for their payment or security, or in any manner questioning the validity of the Obligations will also be furnished. The legal fees to be paid Bond Counsel for services rendered in connection with the issuance of Obligations are contingent on the sale and delivery of the Obligations. The legal opinions of Bond Counsel will accompany the Obligations deposited with DTC or will be printed on the definitive certificates in the event of the discontinuance of the Book-Entry-Only System. Certain legal matters will be passed upon for the Underwriters by their counsel, Andrews Kurth LLP, Austin, Texas whose compensation is contingent on the sale and delivery of the Obligations. The various legal opinions to be delivered concurrently with the delivery of the Obligations express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of the expression of professional judgment, of the transaction opined upon, or of the future performance of the parties to the transaction. Nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. Litigation In the opinion of various officials of the Issuer, there is no litigation or other proceeding pending against or, to their knowledge, threatened against the Issuer in any court, agency, or administrative body (either state or federal) wherein an adverse decision would materially adversely affect the financial condition of the Issuer. Legal Investments and Eligibility to Secure Public Funds in Texas State law provides that obligations, such as the Obligations, are eligible to secure deposits of the state, its agencies, and political subdivisions, and are legal security for those deposits to the extent of their market value. For political subdivisions in Texas which have adopted investment policies and guidelines in accordance with the Public Funds Investment Act, Chapter 2256, as amended, Texas Government Code) the Obligations may have to be assigned a rating of at least A or its equivalent as to investment quality by a national rating agency before such Obligations are eligible investments for sinking funds and other public funds. (See OTHER PERTINENT INFORMATION - Ratings herein.) The City has made no investigation of other laws, rules, regulations or investment criteria which might apply to such institutions or entities or which might limit the suitability of the Obligations for any of the foregoing purposes or limit the authority of such institutions or entities to purchase or invest in the Obligations for such purposes. The City has made no review of laws in other states to determine whether the Obligations are legal investments for various institutions in those states. FORWARD LOOKING STATEMENTS The statements contained in this Official Statement, and in any other information provided by the City, that are not purely historical, are forward-looking statements, including statements regarding the City's expectations, hopes, intentions, or strategies regarding the future. Readers should not place undue reliance on forward-looking statements. All forward-looking statements included in this Official Statement are based on information available to the City on the date hereof, and the City assumes no obligation to update any such forward-looking statements. It is important to note that the City's actual results could differ materially from those in such forward-looking statements. The forward-looking statements herein are necessarily based on various assumptions and estimates and are inherently subject to various risks and uncertainties, including risks and uncertainties relating to the possible invalidity of the underlying assumptions and estimates and possible changes or developments in social, economic, business, industry, market, legal, and regulatory circumstances and conditions and actions taken or omitted to be taken by third parties, including customers, suppliers, business partners and competitors, and legislative, judicial and other governmental authorities and officials. Assumptions related to the foregoing involve judgments with respect to, among other things, future economic, competitive, and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the City. Any of such assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Official Statement will prove to be accurate. Registration and Qualification of Obligations for Sale OTHER PERTINENT INFORMATION The sale of the Obligations has not been registered under the Federal Securities Act of 1933, as amended, in reliance upon the exemption provided thereunder by Section 3(a)(2); and the Bonds have not been qualified under the Securities Act of Texas in reliance upon various exemptions contained therein; or have the Obligations been qualified under the securities acts of any jurisdiction. The Issuer assumes no responsibility for qualification of the Obligations under the securities laws of any jurisdiction in which the Obligations may be sold, assigned, pledged, hypothecated or otherwise transferred. This disclaimer of responsibility for qualification for sale or other disposition of the Obligations shall not be construed as an interpretation of any kind with regard to the availability of any exemption from securities registration provisions. 23

24 It is the obligation of the Underwriters to register or qualify the sale of the Obligations under the securities laws of any jurisdiction which so requires. The City agrees to cooperate, at the Underwriters written request and sole expense, in registering or qualifying the Obligations or in obtaining an exemption from registration or qualification in any state where such action is necessary; provided, however, that the City shall not be required to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction. Ratings Moody s Investors Service, Inc. ( Moody s ) has assigned an unenhanced, underlying rating of Aa2 and Standard & Poor s Ratings Services, a Standard & Poor s Financial Services LLC business ( S&P ) has assigned an unenhanced, underlying rating of AA- to the Obligations. Moody s upgraded the City s unenhanced debt rating from A2 to Aa3 on April 23, 2010 as a result of the recalibration of its municipal ratings (See CONTINUING DISCLOSURE OF INFORMATION Compliance with Prior Undertakings.) An explanation of the significance of such ratings may be obtained from Moody s and S&P. The ratings of the Bonds by Moody s and S&P reflect only the views of Moody s and S&P at the time the rating is given, and the Issuer makes no representations as to the appropriateness of the ratings. There is no assurance that the ratings will continue for any given period of time, or that the ratings will not be revised downward or withdrawn entirely by Moody s and S&P, if, in the judgment of Moody s and S&P, circumstances so warrant. Any such downward revisions or withdrawals of the ratings may have an adverse effect on the market price of the Bonds. Authenticity of Financial Information The financial data and other information contained herein have been obtained from the Issuer's records, audited financial statements and other sources that are believed to be reliable. All of the summaries of the statutes, documents, and the Ordinances contained in this Official Statement are made subject to all of the provisions of such statutes, documents, and the Ordinances. These summaries do not purport to be complete statements of such provisions and reference is made to such documents for further information. All information contained in this Official Statement is subject, in all respects, to the complete body of information contained in the original sources thereof and no guaranty, warranty or other representation is made concerning the accuracy or completeness of the information herein. In particular, no opinion or representation is rendered as to whether any projection will approximate actual results, and all opinions, estimates and assumptions, whether or not expressly identified as such, should not be considered statements of fact. References to web site addresses presented herein are for informational purposes only and may be in the form of a hyperlink solely for the reader s convenience. Unless specified otherwise, such web sites and the information or links contained therein are not incorporated into, and are not part of, this Official Statement for purposes of, and as that term is defined in, SEC Rule 15c2-12. Financial Advisor SAMCO Capital Markets, Inc. is employed as a Financial Advisor to the Issuer in connection with the issuance of the Obligations. In this capacity, the Financial Advisor has compiled certain data relating to the Obligations and has assisted in drafting this Official Statement. The Financial Advisor has not independently verified any of the data contained herein or conducted a detailed investigation of the affairs of the Issuer to determine the accuracy or completeness of this Official Statement. Because of its limited participation, the Financial Advisor assumes no responsibility for the accuracy or completeness of any of the information contained herein. The fees for the Financial Advisor are contingent upon the issuance, sale and delivery of the Obligations. The Financial Advisor has provided the following sentence for inclusion in this Official Statement. The Financial Advisor has reviewed the information in this Official Statement in accordance with its responsibilities to the Issuer and, as applicable, to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Financial Advisor does not guarantee the accuracy or completeness of such information. Underwriting The Underwriters have agreed, subject to certain conditions, to purchase the Bonds from the Issuer at a price of $32,166, (representing the par amount of the Bonds of $29,260,000.00, plus a net reoffering premium of $3,087,495.75, less an Underwriters discount of $180,732.70), plus accrued interest on the Bonds from the Dated Date to the date of initial delivery of the Bonds. The Underwriters have agreed, subject to certain conditions, to purchase the Certificates from the Issuer at a price of $5,579, (representing the par amount of the Certificates of $5,395,000.00, plus a net reoffering premium of $222,119.40, less an Underwriters discount of $37,804.35), plus accrued interest on the Certificates from the Dated Date to the date of initial delivery of the Certificates. The Underwriters obligation is subject to certain conditions precedent. The Underwriters will be obligated to purchase all of the Obligations, if any Obligations, respectively, are purchased. The obligations may be offered and sold to certain dealers and others at prices lower than such public offering prices, and such public prices may be changed, from time to time, by the Underwriters. The Underwriters have provided the following statement for inclusion in this Official Statement. The Underwriters have reviewed the information in this Official Statement in accordance with, and as part of their responsibilities to investors under the federal securities laws applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. One of the Underwriters is BOSC, Inc., which is not a bank, and the Obligations are not deposits of any bank and are not insured by the Federal Deposit Insurance Corporation. 24

25 Certification of the Official Statement At the time of payment for and delivery of the Obligations, the Underwriters will be furnished a certificate, executed by proper officers of the City, acting in their official capacity, to the effect that to the best of their knowledge and belief: (a) the descriptions and statements of or pertaining to the City contained in its Official Statement, and any addenda, supplement or amendment thereto, on the date of such Official Statement, on the date of sale of said Obligations and on the date of the delivery, were and are true and correct in all material respects; (b) insofar as the City and its affairs, including its financial affairs, are concerned, such Official Statement did not and does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (c) insofar as the descriptions and statements, including financial data, of or pertaining to entities, other than the City, and their activities contained in such Official Statement are concerned, such statements and data have been obtained from sources which the City believes to be reliable and the City has no reason to believe that they are untrue in any material respect; and (d) there has been no material adverse change in the financial condition of the City since the date of the last audited financial statements of the City. Authorization of the Official Statement The Official Statement will be approved as to form and content and the use thereof in the offering of the Bonds and the Certificates will be authorized, ratified and approved by the City Council on the date of sale, and the Underwriters will be furnished, upon request, at the time of payment for and the delivery of the Bonds and the Certificates, respectively, a certified copy of such approval, duly executed by the proper officials of the Issuer. The Ordinances approved the form and content of this Official Statement, and any addenda, supplement or amendment thereto issued on behalf of the Issuer, and authorized their further use in the reoffering of the Bonds and the Certificates, respectively, by the Underwriters. This Official Statement has approved in the Ordinances by the City Council of the Issuer for distribution in accordance with the provisions of the Rule. ATTEST: /s/patrick Aten City Secretary City of New Braunfels, Texas CITY OF NEW BRAUNFELS, TEXAS /s/barron Casteel Mayor City of New Braunfels, Texas 25

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27 SCHEDULE I SCHEDULE OF REFUNDED OBLIGATIONS

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29 SCHEDULE I Schedule of Refunded Obligations City of New Braunfels, Texas Combination Tax and Municipal Hotel Occupancy Tax Revenue Certificates of Obligation, Series 2006B Principal Maturity Date Amount Interest Rate Redemption Date 9/1/2018 $ 425, % 9/1/2016 9/1/ , % 9/1/2016 9/1/ , % 9/1/2016 9/1/ , % 9/1/2016 9/1/ , % 9/1/2016 9/1/ , % 9/1/2016 9/1/ , % 9/1/2016 9/1/ , % 9/1/2016 9/1/ , % 9/1/2016 $ 4,705,000 City of New Braunfels, Texas Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2007 (1) (2) Term Bond with final maturity March 1, Term Bond with final maturity March 1, Principal Maturity Date Amount Interest Rate Redemption Date 3/1/2021 $ 750,000 (1) 5.000% 3/1/2017 3/1/2022 $ 750,000 (1) 5.000% 3/1/2017 3/1/2023 (1) 750, % 3/1/2017 3/1/2024 (2) 750, % 3/1/2017 3/1/2025 (2) 750, % 3/1/2017 3/1/2026 (2) 750, % 3/1/2017 3/1/2027 (2) 650, % 3/1/2017 $ 5,150,000 City of New Braunfels, Texas Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2008 Principal Maturity Date Amount Interest Rate Redemption Date 3/1/2023 $ (1) 835, % 3/1/2018 3/1/2024 $ (1) 880, % 3/1/2018 3/1/2025 (2) 930, % 3/1/2018 3/1/2026 (2) 980, % 3/1/2018 3/1/2027 (3) 1,030, % 3/1/2018 3/1/2028 (3) 1,085, % 3/1/2018 $ 5,740,000 (1) (2) (3) Term Bond with final maturity March 1, Term Bond with final maturity March 1, Term Bond with final maturity March 1, SCHEDULE I

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31 APPENDIX A FINANCIAL INFORMATION CITY OF NEW BRAUNFELS, TEXAS

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33 (1) Excludes the Refunded Obligations. FINANCIAL INFORMATION OF THE ISSUER ASSESSED VALUATION TABLE Actual Certified Market Value of Taxable Property (100% of Market Value) $ 5,796,696,820 Less Exemptions: Local Optional Over-65 or Disabled Exemption $ 18,108,065 Veterans' Exemption 48,244,203 Freeport Exemption 20,619,383 Productivity Value Loss 136,198,054 Abatement Value Loss - Low Income Housing - Homestead 503,354,157 Historical/Non Req. Exemption Loss 461,864 10% Per Year Cap on Res. Homesteads 65,876,720 TOTAL EXEMPTIONS 792,862, Assessed Value of Taxable Property $ 5,003,834,374 * Source: Comal and Guadalupe County Appraisal Districts. * Includes Freeze Taxable Value of $553,069,562. GENERAL OBLIGATION BONDED DEBT (as of March 1, 2015) General Obligation Debt Principal Outstanding Combination Tax and Airport System Revenue Certificates of Obligation, Series 2006A $ 935,000 Combination Tax and Municipal Hotel Occupancy Tax Revenue Certificates of Obligation, Series 2006B 1,160,000 (1) General Obligation Refunding Bonds, Series ,670,000 Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series ,350,000 (1) Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series ,870,000 (1) Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series ,840,000 General Obligation Refunding Bonds, Series ,000 Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series ,770,000 Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series ,295,000 General Obligation Refunding Bonds, Series ,530,000 General Obligation Refunding Bonds, Series 2013A 6,980,000 Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series ,135,000 Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2014A 6,635,000 Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2014B (AMT) 3,220,000 General Obligation Bonds, Series ,555,000 The Bonds 29,260,000 The Certificates 5,395,000 Total Gross General Obligation Debt $ 147,950,000 Less: Self Supporting Debt Combination Tax and Airport System Revenue Certificates of Obligation, Series 2006A (100% Airport) $ 935,000 Combination Tax and Municipal Hotel Occupancy Tax Revenue Certificates of Obligation, Series 2006B (100% Hotel Occupancy Tax) (1) 1,160,000 General Obligation Refunding Bonds, Series 2006 (4.81% Sales Tax) Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2007 (<1% Sales Tax) General Obligation Refunding Bonds, Series 2010 (100% Sales Tax) Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2012 (40% Sales Tax) 465, ,000 (1) 350,000 6,920,000 General Obligation Refunding Bonds, Series 2013 (100% Sales Tax) Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2013 (8.41% Sales Tax) 3,530,000 1,525,000 Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2014A (100% Golf Course) 6,635,000 Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2014B (AMT)(100% Airport) 3,220,000 The Bonds (15.94% Hotel Occupancy Tax) 4,280,000 Total Self-Supporting Debt $ 29,620,000 Total Net General Obligation Debt Outstanding $ 118,330, Net Assessed Valuation $ 5,003,834,374 Ratio of Total Gross General Obligation Debt Principal to 2014 Certified Net Taxable Assessed Valuation 2.96% Ratio of Net General Obligation Debt to 2014 Certified Net Taxable Assessed Valuation 2.36% Population: ,334; ,494; ,740; est ,500 Per Capita Certified Net Taxable Assessed Valuation - 77, Per Capita Gross General Obligation Debt Principal - 2,294 Per Capita Net General Obligation Debt Principal - 1,835 A1

34 CITY DEBT OBLIGATIONS - CAPITAL LEASE AND NOTES PAYABLE TABLE 2 (As of September 30, 2014) None GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS (As of March 1, 2015) FYE (9/30) Current Total Outstanding Debt Less: Refunded The Bonds The Certificates Obligations Principal Interest Total Principal Interest Total Combined Debt Service Less: Self Supporting Debt Total Net Debt Service 2015 $ 13,230,727 $ 377,099 $ 12,853,628 $ 3,124, $ 9,728, ,728, ,198 $ 330,000 $ 1,557,622 $ 1,887,622 $ 150,000 $ 233,167 $ 383,167 14,244,976 3,392,679 10,852, ,697, , ,000 1,194,163 1,704, , , ,238 14,028,529 3,352,668 10,675, ,298,276 1,179, ,000 1,170,963 2,075, , , ,088 13,577,129 3,430,980 10,146, ,020,204 1,187, ,000 1,133,663 2,093, , , ,838 13,309,506 3,214,043 10,095, ,882,905 1,189, ,000 1,099,538 2,094, , , ,388 13,170,633 3,215,288 9,955, ,912,056 1,926,178 1,755,000 1,058,288 2,813, , , ,713 13,179,879 3,242,755 9,937, ,750,304 1,893,259 1,795, ,088 2,782, , , ,813 13,022,945 3,138,821 9,884, ,704,861 2,672,912 2,685, ,088 3,560, , , ,688 12,973,724 3,155,096 9,818, ,173,920 2,637,638 2,790, ,213 3,528, , , ,338 12,448,833 2,675,006 9,773, ,129,482 2,607,075 2,895, ,088 3,491, , , ,388 12,398,882 2,687,613 9,711, ,171,191 2,572,063 3,010, ,463 3,458, , , ,438 10,441,029 2,692,506 7,748, ,381,220 1,777,063 2,385, ,438 2,722, , , ,488 9,709,083 1,437,638 8,271, ,709,614 1,112,125 1,780, ,850 2,053, ,000 93, ,756 9,035,095 1,436,425 7,598, ,602, , ,631 1,057, ,000 84, ,350 8,044,859 1,441,050 6,603, ,988, , ,413 1,055, ,000 74, ,438 7,428,123 1,437,356 5,990, ,990, , ,900 1,058, ,000 63, ,000 7,432,285 1,436,591 5,995, ,644, , ,800 1,057, ,000 49, ,900 6,086,831 1,437,138 4,649, ,233, , ,300 1,055, ,000 36, ,300 4,669, ,425 3,798, ,773, ,000 61,300 1,056, ,000 22, ,200 3,211, ,250 2,463, ,035,000 20,700 1,055, ,000 7, ,500 1,438,200-1,438,200 Total $ 186,022,401 $ 22,639,397 $ 29,260,000 $ 12,402,503 $ 41,662,503 $ 5,395,000 $ 2,265,023 $ 7,660,023 $ 212,705,530 $ 47,568,239 $ 165,137,290 (a) Includes self-supporting debt. TAX ADEQUACY (Includes Self-Supporting Debt) 2014 Certified Freeze Adjusted Net Taxable Assessed Valuation Maximum Annual Debt Service Requirements (Fiscal Year Ending ) Indicated Required I&S Fund Tax Rate at 98% Collections to produce Maximum Debt Service Requirements $ $ $ 4,450,764,812 14,244,976 Note: Above computations are exclusive of investment earnings, delinquent tax collections and penalties and interest on delinquent tax collections. TAX ADEQUACY (Excludes Self-Supporting Debt) 2014 Certified Freeze Adjusted Net Taxable Assessed Valuation Maximum Annual Debt Service Requirements (Fiscal Year Ending ) 4,450,764,812 10,852,297 Indicated Required I&S Fund Tax Rate at 98% Collections to produce Maximum Debt Service Requirements $ $ $ Note: Above computations are exclusive of investment earnings, delinquent tax collections and penalties and interest on delinquent tax collections. A2

35 INTEREST AND SINKING FUND MANAGEMENT INDEX Audited Interest and Sinking Fund Balance, Fiscal Year Ended September 30, 2014 $ 1,279, Interest and Sinking Fund Tax Levy at 98% Collections Produce 10,795,672 Plus: Other City Funds 3,124,913 Total Available for General Fund Debt $ 15,199,896 Less: General Obligation Debt Service Requirements, Fiscal Year Ended September 30, 2014 $ 12,853,628 Estimated Surplus at Fiscal Year Ending September 30, 2015 $ 2,346,267 GENERAL OBLIGATION PRINCIPAL REPAYMENT SCHEDULE (As of March 1, 2015) Principal Repayment Schedule Principal Percent of Fiscal Year Currently Less: Refunded The Unpaid at Principal Ending 9-30 Outstanding (a) Obligations The Bonds Certificates Total End of Year Retired (%) 2015 $ 920,000 $ 920,000 $ 147,030, % ,635,000 $ 330,000 $ 150,000 8,115, ,915, % ,885, , ,000 8,600, ,315, % ,775,000 $ 425, , ,000 8,465, ,850, % ,785, , , ,000 8,510, ,340, % ,935, , , ,000 8,680, ,660, % ,270,000 1,245,000 1,755, ,000 9,005,000 95,655, % ,435,000 1,270,000 1,795, ,000 9,195,000 86,460, % ,740,000 2,130,000 2,685, ,000 9,535,000 76,925, % ,575,000 2,200,000 2,790, ,000 9,415,000 67,510, % ,900,000 2,280,000 2,895, ,000 9,775,000 57,735, % ,300,000 2,360,000 3,010, ,000 8,220,000 49,515, % ,840,000 1,680,000 2,385, ,000 7,825,000 41,690, % ,465,000 1,085,000 1,780, ,000 7,450,000 34,240, % ,615, , ,000 6,740,000 27,500, % ,225, , ,000 6,385,000 21,115, % ,460, , ,000 6,665,000 14,450, % ,325, , ,000 5,580,000 8,870, % ,075, , ,000 4,375,000 4,495, % ,730, , ,000 3,085,000 1,410, % ,035, ,000 1,410, % Total $ 128,890,000 $ 15,595,000 $ 29,260,000 $ 5,395,000 $ 147,950,000 (a) Includes self-supporting debt. A3

36 TAXABLE ASSESSED VALUATION FOR TAX YEARS TABLE 3 Net Taxable Change From Preceding Year Year Assessed Valuation Amount ($) Percent $ 2,263,802, ,352,652,837 88,850, % ,883,909, ,256, % ,302,413, ,503, % ,786,876, ,463, % ,948,442, ,565, % ,939,547,264 (8,895,448) -0.23% ,941,733,272 2,186, % ,178,203, ,470, % ,452,304, ,101, % ,003,834, ,529, % Source: Comal and Guadalupe Central Appraisal Districts. PRINCIPAL TAXPAYERS 2014 TABLE 4 % of Total Net Taxable Assessed Name Type of Business/Property Assessed Valuation Valuation Rush Truck Leasing Truck Leasing $ 84,260, % Central Texas Corridor Hospital Co LLC Healthcare 84,260, % A L 95 Creekside Town Center LP Commercial Development 71,526, % Villas at Sundance I LLC, et al Apartments 21,535, % Augusta Gruene Apartments LP Apartments 17,346, % Bucees Ltd & Turner Family Parntshp LTD Retail/Gas Station 18,751, % Western Rim Investors LP Apartments 20,283, % LPF Westpointe LLC Apartments 20,049, % Health Care Reit Inc Healthcare 16,235, % Source: Comal and Guadalupe Central Appraisal Districts. Total $ 354,248, % MUNICIPAL SALES TAX COLLECTIONS TABLE 5 The Issuer has adopted the provisions of Chapter 321, as amended, Texas Tax Code. In addition, some issuers are subject to a property tax relief and/or an economic and industrial development sales tax. The Issuer has an additional 3/8 of 1% sales tax for the benefit of the Issuer s Industrial Development Corporation. Collections on calendar year basis are as follows: % of Ad Valorem Equivalent of Ad Calendar Year Total Collected Tax Levy Valorem Tax Rate 2006 $ 14,700, % $ ,859, % ,893, % ,402, % ,418, % ,841, % ,012, % ,727, % ,959, % ,576,359 (As of March 1, 2015) Source: State Comptroller's Office of the State of Texas. A4

37 CLASSIFICATION OF ASSESSED VALUATION TABLE % of Total 2013 % of Total 2012 % of Total Real, Residential, Single-Family $ 3,511,387, % $ 3,089,331, % $ 2,929,884, % Real, Residential, Multi-Family 321,001, % 297,787, % 247,545, % Real, Vacant Lots/Tracts 173,456, % 163,669, % 157,224, % Real, Acreage (Land Only) 137,064, % 140,938, % 153,095, % Real, Farm and Ranch Improvements 48,236, % 42,354, % 62,210, % Real, Commercial 1,049,747, % 916,848, % 841,679, % Real, Industrial 57,346, % 52,951, % 51,331, % Real & Tangible, Personal Utilities 23,568, % 21,772, % 21,646, % Tangible Personal, Commercial 290,945, % 280,828, % 261,608, % Tangible Personal, Industrial 77,369, % 63,237, % 65,795, % Tangible Personal, Mobile Homes 21,821, % 19,157, % 26,509, % Residential Inventory 47,016, % 23,220, % 17,573, % Special Inventory 37,735, % 31,543, % 27,841, % Total Appraised Value $ 5,796,696, % $ 5,143,641, % $ 4,863,947, % Less: Local Optional Over-65 or Disabled Exemption $ 18,108,065 $ 17,415,405 $ 18,657,855 Veterans' Exemption 48,244,203 40,194,868 37,221,174 Freeport Exemption 20,619,383 22,482,341 21,974,224 Productivity Value Loss 136,198, ,995, ,094,723 Abatement Value Loss ,000 Low Income Housing ,360 Homestead 503,354, ,008, ,052,608 Historical/Non Req. Exemption Loss 461, , ,201 10% Per Year Cap on Res. Homesteads 65,876,720 23,027,557 24,485,364 Net Taxable Assessed Valuation $ 5,003,834,374 $ 4,452,304,694 $ 4,178,203,307 Source: Comal and Guadalupe County Appraisal Districts. TAX DATA TABLE 7 Tax Net Taxable Tax Tax % of Collections Year Year Assessed Valuation Rate Levy Current Total Ended 2004 $ 2,263,802,806 $ $ 10,149, /30/ ,352,652, ,013, /30/ ,883,909, ,819, /30/ ,302,413, ,535, /30/ ,786,876, ,520, /30/ ,948,442, ,183, /30/ ,939,547, ,146, /30/ ,941,733, ,673, /30/ ,178,203, ,526, /30/ ,452,304, ,182, /30/ ,003,834, ,930, /30/2015* * Collections as of February 28, TAX RATE DISTRIBUTION TABLE General Fund $ $ $ $ $ I & S Fund Total Tax Rate $ $ $ $ $ Source: Texas Municipal Report published by the Municipal Advisory Council of Texas, the Comal and Guadalupe County Appraisal Districts, the Issuer s Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, 2014, and information supplied by the Issuer. A5

38 ASSESSED VALUATION AND TAX RATE OF OVERLAPPING ISSUERS Governmental Subdivision 2014 Assessed Valuation % of Actual 2014 Tax Rate Comal County $ 10,954,874, % $ Comal Independent School District 10,399,501, % Guadalupe County 9,992,779, % Navarro Independent School District 588,019, % New Braunfels Indepenedent School District 3,182,552, % Source: Texas Municipal Reports published by the Municipal Advisory Council of Texas. AUTHORIZED BUT UNISSUED GENERAL OBLIGATION BONDS OF DIRECT AND OVERLAPPING GOVERNMENTAL SUBDIVISIONS Date of Issuer Authorization Purpose Authorization Issued to Date* Unissued City of New Braunfels 5/11/2013 Streets and Sidewalks $ 37,500,000 $ 12,955,000 $ 24,545,000 5/11/2013 Flood and Drainage 24,500,000 6,336,000 18,164,000 5/11/2013 Park Improvements 20,000,000 6,499,000 13,501,000 5/11/2013 Municipal Facilities 4,000,000 4,000,000 - $ 86,000,000 $ 29,790,000 $ 56,210,000 Comal County None Comal Independent School District None* Guadalupe County None Navarro Independent School District None New Braunfels Independent School District None Source: Texas Municipal Reports published by the Municipal Advisory Council of Texas. * Includes the issuance of the Bonds. ** Comal ISD has called for a bond election totalling $147,700,000 on May 9, GENERAL FUND COMPARATIVE STATEMENT OF REVENUES AND EXPENDITURES TABLE 9 The following statements set forth in condensed form reflect the historical operations of the Issuer. Such summary has been prepared for inclusion herein based upon information obtained from the Issuer s audited financial statements and records. Reference is made to such statements for further and complete information. Fiscal Year Ended 9/30/2014 9/30/2013 9/30/2012 9/30/2011 9/30/2010 Fund Balance - Beginning of Year $ 19,851,597 $ 24,450,598 $ 27,611,439 $ 23,512,032 $ 21,980,935 Revenues $ 46,993,203 $ 43,527,230 $ 41,181,472 $ 37,955,829 $ 37,315,064 Expenditures 45,335,719 45,412,602 44,643,710 35,985,686 36,480,703 Excess (Deficit) of Revenues Over Expenditures $ 1,657,484 $ (1,885,372) $ (3,462,238) $ 1,970,143 $ 834,361 Other Financing Sources (Uses): Operating Transfers In $ 784,064 $ 1,538,273 $ 1,502,844 $ 1,391,506 $ 1,145,535 Operating Transfers Out (424,994) (4,278,972) (1,297,579) (470,203) (448,971) Proceeds from the Sale of Capital Assets 78,243 27,070 96,132 2,165 6,352 Proceeds from Loan Payable 673, Total Other Financing Sources (Uses): $ 1,110,375 $ (2,713,629) $ 301,397 $ 923,468 $ 702,916 Fund Balance - End of Year $ 22,619,456 $ 19,851,597 $ 24,450,598 $ 26,405,643 $ 23,518,212 Source: The Issuer s Comprehensive Annual Financial Reports and information provided by the Issuer. A6

39 EMPLOYEE'S PENSION PLAN AND OTHER POST-EMPLOYMENT BENEFITS TABLE 10 The City provides pension benefits for all of its eligible employees through a non-traditional, joint contributory, hybrid defined benefit plan in the state-wide Texas Municipal Retirement System (TMRS), an agent multiple employer public employee retirement system. The plan provisions have been adopted by the City are within the options available in the governing state statutes of TMRS. TMRS issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information (RSI) for TMRS; the report also provides detailed explanations of the contributions, benefits and actuarial methods and assumptions used by the System. This report may be obtained by writing to TMRS, P.O. Box , Austin, TX or by calling ; in addition, the report is available on TMRS website at The plan provisions are adopted by the governing body of the City, within the options available in the State statutes governing TMRS. Plan provisions for the City were as follows: Plan Year 2013 Plan Year 2014 Employee deposit rate 7.00% 7.00% Matching Ratio (City to Employee) 2 to 1 2 to 1 Member is invested after 5 5 Members can retire at certain ages, based on 5 years/age 60 5 years/age 60 the years of service with the City Service Retirement Eligibility for the City is 20 Years/any age 20 Years/any age Contributions Updated service Credit 100% repeating, transfers Annuity Increase (to retirees) 70% of CPI repeating 100% repeating, transfers 70% of CPI repeating Under the state law governing TMRS, the contribution rate for each city is determined annually by the actuary, using the Projected Unit Credit actuarial cost method. This rate consists of the normal cost contribution rate and the prior service cost contribution rate, which is calculated to be a level percent of payroll from year to year. The normal cost contribution rate finances the portion of an active member s projected benefit allocated annually; the prior service contribution rate amortizes the unfunded (overfunded) actuarial liability (asset) over the applicable period for that city. Both the normal cost and prior service contribution rates include recognition of the projected impact of annually repeating benefits, such as Updated Service Credits and Annuity Increases. The City contributes to the TMRS Plan at an actuarially determined rate. Both the employees and the City make contributions monthly. Since the City needs to know its contribution rate in advance for budgetary purposes, there is a one-year delay between the actuarial valuation that serves as the basis for the rate and the calendar year when the rate goes into effect. The annual pension cost and net pension obligation are as follows: 1. Annual Required Contribution (ARC) $ 4,921, Interest on Net Pension Obligation 209, Adjustment to the ARC (180,375) 4. Annual Pension Cost 4,951, Contributions Made (4,705,262) 6. Increase in net pension obligation 246, Net Pension Obligation, beginning of year 2,997, Net Pension Obligation, end of year $ 3,243,755 A7

40 EMPLOYEE'S PENSION PLAN AND OTHER POST-EMPLOYMENT BENEFITS - CONT'D The required contribution rates for fiscal year 2014 were determined as part of the December 31, 2011, 2012 and 2013 actuarial valuations. Additional information as of the latest actuarial valuation, December 31, 2013, also follows: Valuation Date 12/31/ /31/ /31/2013 Projected Unit Projected Unit Projected Unit Actuarial Cost Method Credit Credit Credit Amortization Method Level Percent of Payroll Level Percent of Payroll Level Percent of Payroll GASB 25 Equivalent Single 26.2 Years 25.1 Years 30.0 Years Amortization Period closed period closed period closed period Amortization Period for New 30 Years 30 Years 30 Years Gains/Losses Asset Valuation Method Actuarial Assumptions Investment Rate of Return Projected Salary Increases Includes Inflation at Cost-of-Living Adjustments 10-year Smoothed Market 10-year Smoothed Market 10-year Smoothed Market 7.00% 7.00% 7.00% Varies by age and service Varies by age and service Varies by age and service 3.00% 3.00% 3.00% 2.10% 2.10% 2.10% Funded Status and Funding Progress In October 2013, the TMRS Board approved accrual changes in (a) the funding method from Projected Unit Credit to Entry Age Normal, (b) the postretirement mortality assumptions used in calculating liabilities and contribution rates and in the development of the Annuity Purchase Rate factors, and (c) the amortization policy. These actuarial changes were effective with the December 31, 2013 actuarial valuation. For a complete description of the new actuarial cost method and assumptions, please see the December 31, 2013 TMRS Comprehensive Annual Financial Report (CAFR). Schedule of Actuarial Liabilities and Funding Progress Actuarial Actuarial UAAL as Actuarial Value of Accrued Liability Funded Unfunded ALL Covered Percentage of Valuation Assets (AAL) Ration (UAAL) Payroll Covered Payroll Date (A) (B) (A)/(B) (D)=(B)-(A) (E) (D)/(E) 12/31/2011 $ 65,548,163 $ 94,893, % $ 29,345,268 $ 24,680, % 12/31/ ,007, ,466, % 28,459,112 25,599, % 12/31/ ,696, ,178, % 32,482,940 28,208, % Source: The Issuer s Comprehensive Annual Financial Report for the Fiscal Year Ended September 30, A8

41 EMPLOYEE'S PENSION PLAN AND OTHER POST-EMPLOYMENT BENEFITS - CONT'D Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Actuarial calculations are based on the benefits provided under the terms of the substantive plan in effect at the time of each valuation, and reflect a long-term perspective. Consistent with that perspective, actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The schedule of finding progress, presented in the table above, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability of benefits. Supplemental Death Benefits Fund The City also participates in the cost sharing multiple-employer defined benefit group term life insurance plan operated by the Texas Municipal Retirement System (TMRS) known as the Supplemental Death Benefits Fund (SDBF). The City elected, by ordinance, to provide group term life insurance coverage to both current and retired employees. The City may terminate coverage under and discontinue participation in SDBF by adopting an ordinance before November 1 of any year to be effective the following January 1. The death benefit for active employees provides a lump sum payment approximately equal to the employee's annual salary (calculated based on the employee's actual earnings, for the 12-month period precedent the month of death); retired employees are insured for $7,500; this coverage is an "other postemployment benefit," or OPEB. The City contributes to the SDBF at a contractually required rate as determined by an annual actuarial valuation. The rate is equal to the cost of providing one-year term life insurance. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death benefit payments for the upcoming year; the intent is not to pre-fund retiree term life insurance during employees' entire careers. The City's contributions to the TMRS SDBF for the years ended 2014, 2013, and 2012 were $37,082; $35,821; and $34,785; respectively, which equaled the required contribution each year. A9

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43 APPENDIX B GENERAL INFORMATION REGARDING THE CITY OF NEW BRAUNFELS, TEXAS AND COMAL AND GUADALUPE COUNTIES, TEXAS

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45 General Information GENERAL INFORMATION REGARDING THE CITY OF NEW BRAUNFELS, COMAL AND GUADALUPE COUNTIES, TEXAS The City of New Braunfels, Texas (the City ) is a political subdivision of the State of Texas located on Interstate Highway 35, 33 miles northeast of San Antonio. The City operates as a home rule municipality under the laws of the State of Texas. The City s 2010 population was 57,740, and the estimated 2015 population is 64,500. The City serves as the county seat of Comal County. A portion of the City also lies within Guadalupe County. Tourists can enjoy local dining, shopping, recreational activities at Landa Park, river activities on Canyon Lake and Schlitterbahn Water Park, and the annual Wurstfest celebration. A new Civic/Convention Center located in downtown New Braunfels has expanded the meetings market providing large and small organizations with a high tech, attractive facility. Transportation The City is primarily served by Interstate Highway 35 and State Highway 46. Railroads include the Union Pacific and Missouri Kansas and Texas Lines. The City s airport facility encompasses 1,000 acres and has 3 runways (5,350 x150 ), 4 taxiways (50 W), and a parking ramp (300 x 2,700 ). The airport runways are all asphalt with threshold lights and full runway lights. Jet fuel, aviation gas, and car rentals are available during office hours and by appointment at other times. The airport, located approximately 5 miles from the City, is reported to have an average of 71 flights per day. Many large corporations use New Braunfels Airport for corporate flights, including Mission Valley Texas Textiles and Tyson Foods of Seguin. Greyhound/Trailways Bus Lines serve the City as well as several motor freight lines. Education Two school districts (Comal Independent School District and New Braunfels Independent School District) enroll more than 33,000 students in 40 schools (K-12). Both school districts are recognized academically acceptable. Less than 15 miles away are three top rated colleges and technical schools: Texas Lutheran, Texas State University and Central Texas Technology Center. Ten more colleges and universities are within a 30 minute commute time. Economy Agriculture continues to serve as an important source of income to the area. Products include: hay, milo, corn, wheat, oat, pecan and nursery crops; goat, beef, hog, horse, sheep, wool and mohair production; and Christmas trees. The City has a wide range of commercial establishments including restaurants, motels, food stores and service stations. Deer hunting is an important source of income to the ranchers in the area. Recreation There are twenty-six parks totaling over 500 acres for outdoor recreation that include nature trails, playgrounds, picnic areas, Olympic and spring-fed pools, recreation center, historical area, soccer and softball fields, tube chute, concessions, volleyball, basketball and tennis courts. Nearby Canyon Lake (16 miles), Lake Dunlap and Lake McQueeney (5 miles east) and two rivers (Comal and Guadalupe) make boating, scuba-diving, camping, dining, tubing, rafting, kayaking, swimming, fishing available. The #1 rated waterpark Schlitterbahn boasts over 65-acres of water recreation. Tourism and Recreation Located in the heart of the City are Comal Springs and Landa park, a 300-acre park which includes an 18-golf course, tennis course, large picnic and playground areas, an Olympic-size swimming pool, and the largest spring-fed swimming pool in Texas. The Sundance executive golf course opened in Natural Bridge-Caverns, the state s largest caverns, and Natural Bridge Wildlife Park are major tourist attractions located in the southern part of Coal County. Scenic drives and historic sites attract many tourists to the area. Canoeing, tubing, rafting, kayaking, and other white water sports on the Guadalupe and Comal Rivers are popular. Gruene hall, the oldest dancehall in Texas, is also located in the Greater New Braunfels area and attracts many visitors. Canyon Lake, located twenty miles from the City, is a popular water-resort area for sailing, boating, fishing, water skiing, and scuba diving. Several parks have been established around the Lake. Annual festivals include: the Comal County Fair and Wurstfest. The annual Wurstfest is a 10-day event begins on the Friday before the first Monday in November. Average annual attendance is estimated to be 110,000 with revenues from admissions and concessions in excess of $1,000,000.

46 COMAL COUNTY General Information Comal County, Texas (the County ), a pioneer German settlement, was created in 1846 from Bexar, Gonzales and Travis Counties, Texas. This scenic south central Texas county was named after the Comal Springs and the Comal River that flow through New Braunfels, Texas, the County seat. The County has an area of 567 square miles. There are six other cities within Comal County, the City of Garden Ridge, the City of Schertz, the City of Selma, the City of Fair Oaks Ranch and the City of Bulverde. Commercial The County s location between San Antonio and Austin provides opportunities for commuters to live in the county and work in one of the major cities. During 2013, 366 new home sites became available in subdivisions in the unincorporated areas of Comal County. The County has continued to enjoy a prosperous economy. The major sectors of Comal County s economy, manufacturing, tourism, distribution and real estate continue to grow. Major Employers Labor Force Statistics (1) As of February, Number Employer of Employees Comal ISD 2,300 Schlitterbahn Water Park 1,689 Wal-Mart Distribution Center 1,065 New Braunfels ISD 928 Christus Santa Rosa hospital 692 Comal County 587 HEB Retail Grocery 561 City of New Braunfels 508 Hunter Industries/Colorado Materials, Inc. 500 Wal-Mart Super Center Retail Store (1) Civilian Labor Force 58,811 58,972 58,046 56,249 55,012 Total Employed 56,457 56,300 54,485 52,834 51,202 Total Unemployed 2,354 2,672 3,561 3,415 3,810 %Unemployed 4.0% 4.5% 6.1% 6.1% 6.9% % Unemployed (Texas) 4.6% 5.1% 6.3% 6.8% 7.9% % Unemployed (United States) 5.8% 6.2% 7.4% 8.1% 8.9%

47 GUADALUPE COUNTY Guadalupe County, Texas (the County ) located in south central Texas, is bounded by Comal, Hays, Caldwell, Gonzales, Wilson, and Bexar counties. The County seat is the City of Seguin, Texas. Guadalupe County was created from Gonzales and Bexar counties and was organized on July 13, The County takes its name from the Guadalupe River, which Alonso de Leon named in 1689 in honor of the Lady of Guadalupe depicted on his standard. The County is a component of the San Antonio Area Metropolitan Statistical Area (MSA) and covers an area of 715 square miles. The County is traversed by Interstate Highway 35 and Highway 10 (east to west). US Highway 90 and US Highway 90A both branch off Interstate Highway 10 in Seguin and continue eastward to the county line toward Luling and Gonzales. Additionally, the County has two major state highways, State Highway 46 and State Highway 123 that both bisect the County (north to south). Recently completed is State Highway 130, a toll road, which is meant to divert traffic on Interstate Highway 35 around Austin. State Highway 130 begins in Georgetown and travels east of Austin, coming into Guadalupe County on the northeast boundary and connecting to Interstate Highway 10 east of Seguin. Major commercial construction projects, such as a new Caterpillar plant, a major expansion project by Guadalupe Regional Medical Center, and a new warehouse distribution center by Amazon, significantly contributed to the lower unemployment rate. The recent increase in employment and sales tax is also attributed to the residual activity from the Eagle Ford Shale oil development in areas south of Guadalupe County. The Eagle Ford Shale gas formation was discovered in 2008 and is unlike many other shale formations because it has both oil and natural gas resources. Located in Southwest Texas from the Mexican border to areas in east Texas, all south of Guadalupe County, the Eagle Ford Shale is estimated to have trillion cubic feet of natural gas and billion barrels of oil. The formation ranges in depth from 4,000 to 14,000 feet and covers over 3,000 square miles. Major Employers Employer City of Schertz City of Seguin CMC Steel Texas Continental AG (Motorola) Guadalupe Regional Medical Center HEB Schertz-Cibolo-Universal City Independent School District Seguin Independent School District Texas Power System/CAT Tyson Foods Vision Works Walmart

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49 APPENDIX C FORMS OF LEGAL OPINIONS OF BOND COUNSEL

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51 Norton Rose Fulbright US LLP 300 Convent Street, Suite 2100 San Antonio, Texas United States Tel Fax nortonrosefulbright.com FINAL IN REGARD to the authorization and issuance of the City of New Braunfels, Texas Combination Tax and Limited Pledge Revenue Certificates of Obligation, Series 2015 (the Certificates), dated April 15, 2015 in the aggregate principal amount of $5,395,000, we have reviewed the legality and validity of the issuance thereof by the City Council of the City of New Braunfels, Texas (the Issuer). The Certificates are issuable in fully registered form only, in denominations of $5,000 or any integral multiple thereof (within a Stated Maturity). The Certificates have Stated Maturities of February 1 in each of the years 2016 through 2035, unless redeemed prior to Stated Maturity in accordance with the terms stated on the face of the Certificates. Interest on the Certificates accrues from the dates, at the rates, in the manner, and is payable on the dates, as provided in the ordinance (the Ordinance) authorizing the issuance of the Certificates. Capitalized terms used herein without definition shall have the meanings ascribed thereto in the Ordinance. WE HAVE SERVED AS BOND COUNSEL for the Issuer solely to pass upon the legality and validity of the issuance of the Certificates under the laws of the State of Texas and with respect to the exclusion of the interest on the Certificates from the gross income of the owners thereof for federal income tax purposes and for no other purpose. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data, or other material relating to the financial condition or capabilities of the Issuer or the Issuer s solid waste management system and have not assumed any responsibility with respect to the financial condition or capabilities of the Issuer or the disclosure thereof in connection with the sale of the Certificates. We express no opinion and make no comment with respect to the sufficiency of the security for or the marketability of the Certificates. Our role in connection with the Issuer s Official Statement prepared for use in connection with the sale of the Certificates has been limited as described therein. WE HAVE EXAMINED, the applicable and pertinent laws of the State of Texas and the United States of America. In rendering the opinions herein we rely upon (1) original or certified copies of the proceedings of the City Council of the Issuer in connection with the issuance of the Certificates, including the Ordinance; (2) customary certifications and opinions of officials of the Issuer; (3) certificates executed by officers of the Issuer relating to the expected use and investment of proceeds of the Certificates and certain other funds of the Issuer, and to certain other facts solely within the knowledge and control of the Issuer; and (4) such other documentation, including an examination of the Certificate executed and delivered initially by the Issuer, and such matters of law as we deem relevant to the matters discussed below. In such examination, we have assumed the authenticity of all documents submitted to us as originals, the conformity to original copies of all documents submitted to us as certified copies, and the accuracy of the statements and information contained in such certificates. We express Norton Rose Fulbright US LLP is a limited liability partnership registered under the laws of Texas. Norton Rose Fulbright US LLP, Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP and Norton Rose Fulbright South Africa Inc are separate legal entities and all of them are members of Norton Rose Fulbright Verein, a Swiss verein. Norton Rose Fulbright Verein helps coordinate the activities of the members but does not itself provide legal services to clients. Details of each entity, with certain regulatory information, are available at nortonrosefulbright.com.

52 Legal Opinion of Norton Rose Fulbright US LLP, San Antonio, Texas, in connection with the authorization and issuance of CITY OF NEW BRAUNFELS, TEXAS COMBINATION TAX AND LIMITED PLEDGE REVENUE CERTIFICATES OF OBLIGATION, SERIES 2015 no opinion concerning any effect on the following opinions which may result from changes in law effected after the date hereof. BASED ON OUR EXAMINATION, IT IS OUR OPINION that the Certificates have been duly authorized and issued in conformity with the laws of the State of Texas now in force and that the Certificates are valid and legally binding obligations of the Issuer enforceable in accordance with the terms and conditions described therein, except to the extent that the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors rights or the exercise of judicial discretion in accordance with general principles of equity. The Certificates are payable from the levy of an ad valorem tax, within the limitations prescribed by law, upon all taxable property in the Issuer and are further payable from and secured by a lien on and pledge of the Pledged Revenues (as defined in the Ordinance), being a limited amount of the Net Revenues (as defined in the Ordinance) derived from the operation of the Issuer s solid waste management system (the System), such lien on and pledge of the limited amount of Net Revenues being subordinate and inferior to the lien on and pledge thereof providing for the payment and security of any Prior Lien Obligations or Junior Lien Obligations (each term as defined in the Ordinance) hereafter issued by the Issuer. The Issuer has previously authorized the issuance of the Limited Pledge Obligations (as defined in the Ordinance) that are payable in part from and secured by a lien on and pledge of a limited amount of the Net Revenues of the System as described in the ordinances authorizing the issuance of the currently outstanding Limited Pledge Obligations. In the Ordinance, the Issuer retains the right to issue Prior Lien Obligations, Junior Lien Obligations, and Additional Limited Pledge Obligations (all such terms as defined in the Ordinance), without limitation as to principal amount but subject to any terms, conditions, or restrictions as may be applicable thereto under law or otherwise. BASED ON OUR EXAMINATION, IT IS FURTHER OUR OPINION that, assuming continuing compliance after the date hereof by the Issuer with the provisions of the Ordinance and in reliance upon the representations and certifications of the Issuer made in a certificate of even date herewith pertaining to the use, expenditure, and investment of the proceeds of the Certificates, under existing statutes, regulations, published rulings, and court decisions (1) interest on the Certificates will be excludable from the gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date hereof (the Code), of the owners thereof for federal income tax purposes, pursuant to section 103 of the Code, and (2) interest on the Certificates will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals or, except as hereinafter described, corporations. WE CALL YOUR ATTENTION TO THE FACT that, with respect to our opinion in clause (2) above, interest on all tax-exempt obligations, such as the Certificates, owned by a corporation will be included in such corporation s adjusted current earnings for purposes of calculating the alternative minimum taxable income of such corporation, other than an S corporation, a mutual fund, a financial asset securitization investment trust, a real estate mortgage investment conduit, or a real estate investment trust. A corporation s alternative minimum taxable income is the basis on which the alternative minimum tax imposed by section 55 of the Code will be computed.

53 Legal Opinion of Norton Rose Fulbright US LLP, San Antonio, Texas, in connection with the authorization and issuance of CITY OF NEW BRAUNFELS, TEXAS COMBINATION TAX AND LIMITED PLEDGE REVENUE CERTIFICATES OF OBLIGATION, SERIES 2015 WE EXPRESS NO OTHER OPINION with respect to any other federal, state, or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Certificates. Ownership of taxexempt obligations such as the Certificates may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, owners of an interest in a financial asset securitization investment trust, individual recipients of Social Security or Railroad Retirement Benefits, individuals otherwise qualifying for the earned income credit, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. OUR OPINIONS ARE BASED on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. Norton Rose Fulbright US LLP

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55 Norton Rose Fulbright US LLP 300 Convent Street, Suite 2100 San Antonio, Texas United States Tel Fax nortonrosefulbright.com Norton Rose Fulbright US LLP is a limited liability partnership registered under the laws of Texas. FINAL IN REGARD to the authorization and issuance of the City of New Braunfels, Texas General Obligation and Refunding Bonds, Series 2015 (the Bonds), dated April 15, 2015, in the aggregate principal amount of $29,260,000, we have reviewed the legality and validity of the issuance thereof by the City Council of the City of New Braunfels, Texas (the Issuer). The Bonds are issuable in fully registered form only, in denominations of $5,000 or any integral multiple thereof (within a Stated Maturity). The Bonds have Stated Maturities of February 1 in each of the years 2016 through 2035, unless redeemed prior to Stated Maturity in accordance with the terms stated on the face of the Bonds. Interest on the Bonds accrues from the dates, at the rates, in the manner, and is payable on the dates, all as provided in the ordinance (the Ordinance) authorizing the issuance of the Bonds. Capitalized terms used herein without definition shall have the meanings ascribed thereto in the Ordinance. WE HAVE SERVED AS BOND COUNSEL for the Issuer solely to pass upon the legality and validity of the issuance of the Bonds under the laws of the State of Texas, the defeasance and discharge of the Issuer s obligations being refunded by the Bonds, and with respect to the exclusion of the interest on the Bonds from the gross income of the owners thereof for federal income tax purposes and for no other purpose. We have not been requested to investigate or verify, and have not independently investigated or verified, any records, data, or other material relating to the financial condition or capabilities of the Issuer. We have not assumed any responsibility with respect to the financial condition or capabilities of the Issuer or the disclosure thereof in connection with the sale of the Bonds. We express no opinion and make no comment with respect to the sufficiency of the security for or the marketability of the Bonds. Our role in connection with the Issuer s Official Statement prepared for use in connection with the sale of the Bonds has been limited as described therein. WE HAVE EXAMINED the applicable and pertinent laws of the State of Texas and the United States of America. In rendering the opinions herein we rely upon (1) original or certified copies of the proceedings of the City Council of the Issuer in connection with the issuance of the Bonds, including the Ordinance, the Escrow and Trust Agreement (the Escrow Agreement) between the Issuer and BOKF, NA dba Bank of Texas, Austin, Texas (the Escrow Agent), and a special report (the Report) of Barthe & Wahrman, P.A., Minneapolis, Minnesota (the Verification Agent) concerning the sufficiency of the cash and investments deposited with the Escrow Agent; (2) customary certifications and opinions of officials of the Issuer; (3) certificates executed by officers of the Issuer relating to the expected use and investment of proceeds of the Bonds and certain other funds of the Issuer, and to certain other facts solely within the knowledge and control of the Issuer; and (4) such other documentation, including an examination of the Bonds executed and delivered initially by the Issuer, and such matters of law as we deem relevant to the matters discussed below. In such examination, we have assumed the authenticity of all documents submitted to us as originals, the conformity to original copies of all documents Norton Rose Fulbright US LLP, Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP and Norton Rose Fulbright South Africa Inc are separate legal entities and all of them are members of Norton Rose Fulbright Verein, a Swiss verein. Norton Rose Fulbright Verein helps coordinate the activities of the members but does not itself provide legal services to clients. Details of each entity, with certain regulatory information, are available at nortonrosefulbright.com.

56 Legal Opinion of Norton Rose Fulbright US LLP, San Antonio, Texas, in connection with the authorization and issuance of CITY OF NEW BRAUNFELS, TEXAS GENERAL OBLIGATION AND REFUNDING BONDS, SERIES 2015 submitted to us as certified copies, and the accuracy of the statements and information contained in such certificates. We express no opinion concerning any effect on the following opinions which may result from changes in law effected after the date hereof. BASED ON OUR EXAMINATION, IT IS OUR OPINION that the Escrow Agreement has been duly authorized, executed, and delivered by the Issuer and, assuming due authorization, execution, and delivery thereof by the Escrow Agent, is a valid and binding obligation, enforceable in accordance with its terms (except to the extent that the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors rights or the exercise of judicial discretion in accordance with general principles of equity), and that the outstanding obligations refunded, discharged, paid, and retired with certain proceeds of the Bonds have been defeased and are regarded as being outstanding only for the purpose of receiving payment from the funds held in trust with the Escrow Agent, pursuant to the Escrow Agreement and the ordinances authorizing their issuance, and in accordance with the provisions of Chapter 1207, as amended, Texas Government Code. In rendering this opinion, we have relied upon the Report of the Verification Agent concerning the sufficiency of the cash and investments deposited with the Escrow Agent pursuant to the Escrow Agreement for the purposes of paying the outstanding obligations refunded and to be retired with the proceeds of the Bonds and the interest thereon. BASED ON OUR EXAMINATION, IT IS FURTHER OUR OPINION that the Bonds have been duly authorized and issued in conformity with the laws of the State of Texas now in force and that the Bonds are valid and legally binding obligations of the Issuer enforceable in accordance with the terms and conditions described therein, except to the extent that the enforceability thereof may be affected by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors rights or the exercise of judicial discretion in accordance with general principles of equity. The Bonds are payable from the proceeds of an ad valorem tax levied, within the limitations prescribed by law, upon all taxable property in the Issuer. BASED ON OUR EXAMINATION, IT IS FURTHER OUR OPINION that, assuming continuing compliance after the date hereof by the Issuer with the provisions of the Ordinance and in reliance upon the Report of the Verification Agent concerning the sufficiency of the cash and investments deposited with the Escrow Agent pursuant to the Escrow Agreement and upon the representations and certifications of the Issuer made in a certificate of even date herewith pertaining to the use, expenditure, and investment of the proceeds of the Bonds, under existing statutes, regulations, published rulings, and court decisions (1) interest on the Bonds will be excludable from the gross income, as defined in section 61 of the Internal Revenue Code of 1986, as amended to the date hereof (the Code), of the owners thereof for federal income tax purposes, pursuant to section 103 of the Code, and (2) interest on the Bonds will not be included in computing the alternative minimum taxable income of the owners thereof who are individuals or, except as hereinafter described, corporations. WE CALL YOUR ATTENTION TO THE FACT that, with respect to our opinion in clause (2) above, interest on all tax-exempt obligations, such as the Bonds, owned by a corporation will be included in such corporation s adjusted current earnings for purposes of calculating the

57 Legal Opinion of Norton Rose Fulbright US LLP, San Antonio, Texas, in connection with the authorization and issuance of CITY OF NEW BRAUNFELS, TEXAS GENERAL OBLIGATION AND REFUNDING BONDS, SERIES 2015 alternative minimum taxable income of such corporation, other than an S corporation, a mutual fund, a financial asset securitization investment trust, a real estate mortgage investment conduit, or a real estate investment trust. A corporation s alternative minimum taxable income is the basis on which the alternative minimum tax imposed by section 55 of the Code will be computed. WE EXPRESS NO OTHER OPINION with respect to any other federal, state, or local tax consequences under present law or any proposed legislation resulting from the receipt or accrual of interest on, or the acquisition or disposition of, the Bonds. Ownership of tax-exempt obligations such as the Bonds may result in collateral federal tax consequences to, among others, financial institutions, life insurance companies, property and casualty insurance companies, certain foreign corporations doing business in the United States, S corporations with subchapter C earnings and profits, owners of an interest in a financial asset securitization investment trust, individual recipients of Social Security or Railroad Retirement Benefits, individuals otherwise qualifying for the earned income credit, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry, or who have paid or incurred certain expenses allocable to, tax-exempt obligations. OUR OPINIONS ARE BASED on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any law that may thereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. Norton Rose Fulbright US LLP

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59 APPENDIX D FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2014

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61 INDEPENDENT AUDITORS' REPORT The Honorable Mayor Members of the City Council City of New Braunfels New Braunfels, Texas Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of New Braunfels, as of and for the year ended September 30, 2014, and the related notes to the financial statements, which collectively comprise the entity s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of New Braunfels Utilities, which represent 95.9 percent, 95.1 percent, and 95.8 percent, respectively, of the assets, net position, and revenues of the discretely presented component units. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for New Braunfels Utilities, is based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 1

62 The Honorable Mayor Members of the City Council City of New Braunfels Opinions In our opinion, based on our audit and report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of New Braunfels as of September 30, 2014, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 13, beginning net position required a restatement to correct a misstatement in the September 30, 2013 financial statements. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparison information, and Schedule of Funding Progress - Pension and Other Post Employment Benefits on page 4 through 14 and page 51 through 54 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of New Braunfels s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards, as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, is also presented for purposes of additional analysis and is not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and the schedule of expenditures of federal awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. 2

63 The Honorable Mayor Members of the City Council City of New Braunfels Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 20, 2015, on our consideration of the City of New Braunfels's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the result of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City of New Braunfels s internal control over financial reporting and compliance. Dallas, Texas March 20,

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65 CITY OF NEW BRAUNFELS MANAGEMENT S DISCUSSION AND ANALYSIS This section of the City of New Braunfels annual financial report presents our discussion and analysis of the City s financial performance during the fiscal year ended September 30, Please read it in conjunction with the City s financial statements, which follow this section. FINANCIAL HIGHLIGHTS The City s total combined net position was $65,727,667 as of September 30, During the year, the City s expenses for governmental activities were $80,775,093 or $11,492,767 (14.2 percent) more than the $69,282,326 generated in taxes and program revenues for governmental activities. The General Fund reported an ending fund balance this year of $22,619,456, an increase of $2,767,859 or 13.9 percent in comparison to the prior fiscal year. This balance exceeds the City s required 25 percent of operating expenditures. However, it is important to note that this fund balance includes all of the fund balance in the General Fund, Equipment Replacement Fund, and the Facilities Maintenance Fund. The Equipment Replacement Fund contributes $4,407,998 to this stated fund balance. This fund allows the City to account for equipment replacement and improvements to the Civic/Convention Center in a separate fund and not include these activities which are business activities in the general operating fund. The City of New Braunfels major revenue sources remained fairly steady or showed growth in FY when compared to the prior year. Taxable property tax values (freeze adjusted) increased by 11.1 percent overall with values from new growth a major portion of the increase. Sales tax revenue grew a healthy 10.3 percent overall in FY in comparison to the prior fiscal year. This maintained the trend of growth in FY (7.6 percent), FY (10.2 percent) and FY (12.2 percent). Looking forward to FY , the City expects continued increases in sales tax; this revenue source comprised 37.7 percent of total General Fund revenue in FY In fiscal year , the City s operating costs were $4,922,475 or 14 percent less than the prior year. Very few positions were authorized in FY In addition, operating budgets were held fairly flat. The City s equipment replacement program was also suspended in FY , which reduced expenditures approximately $875,000. This was necessary to bring recurring revenues in line with recurring expenditures. Moreover, a onetime settlement occurred in FY ($691,000), which is also a factor in the year to year decrease. The only compensation adjustments funded in FY were the annual step pay plan increases for uniformed fire and police personnel. The City did issue $13.97 million in general obligation bonds and $ million in certificates of obligation in FY to fund various needed capital improvement projects. All general obligation bonds were associated with the 2013 bond program; specifically to begin design and right of way acquisition on projects in all four propositions. The Certificates of Obligations were associated with the renovation of the Landa Park Golf Course and the purchase/renovation of Airport facilities. The debt service for the certificates of obligation will be funded by taxpayer revenue. Figure A-1, Required Components of the City s Annual Financial Report OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of several parts management s discussion and analysis (this section), the basic financial statements, and required supplementary information including the statistical section. The basic financial statements include two kinds of statements that present different views of the City: The first two statements are government-wide financial statements that provide both long-term and short-term information about the City s overall financial status. The remaining statements are fund financial statements that focus on individual parts of the government, reporting the City s operations in more detail than the government-wide statements. 4

66 o o o The governmental funds statements tell how general government services were financed in the short term as well as what remains for future spending. Proprietary fund statements offer short and long-term financial information about the activities the government operates like businesses, such as the airport, civic/convention center, solid waste and golf. Component unit statements provide information about other organizations which provide support to the City. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the information in the financial statements. The financial report also includes statistical tables that provide further information and data covering, in many cases, the last ten years. Figure A-1 shows how the required parts of this annual report are arranged and related to one another. Figure A-2 summarizes the major features of the City s financial statements, including the portion of the City government they cover and the types of information they contain. The remainder of this overview section of management s discussion and analysis explains the structure and contents of each of the statements. Government-wide Statements The government-wide statements report information about the City as a whole using accounting methods similar to those used by privatesector companies. The statement of net position includes all of the government s assets and liabilities. All of the current year s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government-wide statements report the City s net position and how they have changed. Net position the difference between the City s assets and liabilities is one way to measure the City s financial health or position. Over time, increases or decreases in the City s net position are an indicator of whether its financial health is improving or deteriorating, respectively. To assess the overall health of the City, consideration must be given to additional non-financial factors such as changes in the City s property and sales tax base. The government-wide financial statements of the City include the Governmental Activities. Most of the City s basic services are included here such as public safety, streets and drainage, public improvements, parks and recreation, planning and development, library, and general administration. Property and sales taxes finance a significant portion of these activities. Fund Financial Statements The fund financial statements provide more detailed information about the City s most significant funds not the City as a whole. Funds are accounting devices that the City uses to keep track of specific sources of funding and spending for particular purposes. Some funds are required by State law and by debt covenants. 5

67 The City establishes other funds to control and manage money for particular purposes or to show that it is properly using certain taxes and grants. Over the last several years, the City has worked to consolidate funds where appropriate to better manage, account for and administer its financial resources. In the last five years, more than twenty funds have been closed. The City has three kinds of funds: Governmental funds Most of the City s basic services are included in governmental funds, which focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances left at year-end that are available for spending. Consequently, the governmental fund statements provide a detailed short-term view that helps the reader determine whether there are more or fewer financial resources that can be spent in the near future to finance the City s programs. Because this information does not encompass the additional long-term focus of the government-wide statements, additional information is provided at the bottom of the governmental funds statement, or on the subsequent page, that explains the relationship (or differences) between them. Proprietary funds Services for which the City charges customers a fee are generally reported in proprietary funds. Proprietary funds, like the government-wide statements, provide both short and long-term financial information. These include the City s enterprise funds Airport, Civic/Convention Center, Solid Waste, Stormwater and Golf. Internal service funds Report activities that provide supplies and services for the City s other programs and activities such as the City s Self Insurance Fund. 6

68 FINANCIAL ANALYSIS OF THE CITY AS A WHOLE Table A-1 City of New Braunfels (in thousands of dollars) Governmental Business Type Activities Activities Total Total , , , Percent restated restated restated Change Assets: Cash and cash equivalents $ 68,108 $ 69,079 $ 3,586 $ 3,685 $ 71,694 $ 72,764 1% Acounts receivable (net) 5,391 5, ,439 5,919 9% Due from other govts 1, , % Prepaid items % Inventories, at cost % Capital assets Land & constr. In progress 25,428 25,776 2,299 2,299 27,727 28,075 1% Other capital assets, net 75,526 89,118 23,949 33,383 99, ,501 23% Total Assets 176, ,764 29,916 39, , ,187 12% Deferred Charge on Refunding $ 900 $ 788 $ - $ - $ 900 $ % Liabilities: Accounts payable $ 3,306 $ 6,318 $ 243 $ 165 $ 3,549 $ 6,483 83% Deposits payable % Accrued expenses paybale 2,243 2, ,403 2,581 7% Unearned revenue % Non-current liabilities: Due within one year 8,799 9, ,012 10,327 15% Due in more than one year 124, , , , ,320 16% Total Liabilities 138, ,751 1,613 2, , ,247 18% Net Position: Net investment in capital assets $ 17,376 $ 8,094 $ 26,249 $ 34,960 $ 43,625 $ 43,054-1% Restricted: Capital projects 4,826 4, ,826 4,169-14% Cemetery perpetual care % Other 3,012 2, ,012 2,616-13% Unrestricted 12,650 13,828 2,054 1,967 14,704 15,795 7% Total Net Position 37,958 28,801 28,303 36,927 66,261 65,728-1% 7

69 Changes in Net Position. The City s total revenues were $80.31 million. A significant portion, $50.97 million or 63.5 percent the City s revenue comes from taxes and franchise fees (contributions from the City owned utility and other franchised utilities). (See Figure A-3.) 26.1 percent relates to charges for services (including licenses and permits and parks fees), 0.1 percent is from interest income and 2.5 percent comes from grants and contributions. The total cost of all programs and services was $80.8 million; 43.1 percent of the governmental activities costs are for public safety. Table A-2 City of New Braunfels (in thousands of dollars) Governmental Business Type Activities Activities Total , , , Percentage restated restated restated Change Program Revenues: Charges for services $ 10,112 $ 10,512 $ 10,355 $ 10,478 $ 20,467 $ 20,990 3% Operating grants and contributions 1,000 1, ,055 1,582 50% Captial grants and contributions 3,000-4, , % General Revenues Taxes and Franchise Fees 47,170 50, ,170 50,973 8% Investment income % Miscellaneous 6,298 6,172 (233) 67 6,065 6,239 3% Total Revenues $ 67,767 $ 69,283 $ 14,749 $ 11,030 $ 82,516 $ 80, % Expenses: General government $ 12,083 $ 14,850 $ - $ - $ 12,083 $ 14,850 23% Finanace and tax 1, , % Planning and environmental development 3,413 2, ,413 2,489-27% Public safety 30,057 31, ,057 31,597 5% Public works 12,973 8, ,973 8,241-36% Parks and recreation 3,632 4, ,632 4,572 26% Library 2,203 2, ,203 2,400 9% Civic/Convention Center % Interest on long term debt 3,913 4, ,913 4,985 27% Airport ,305 2,855 2,524 2,962 17% Solid waste - - 5,779 6,171 5,779 6,171 7% Golf Course % Total Expenses $ 69,803 $ 70,218 $ 9,659 $ 10,628 $ 79,462 $ 80,846 2% Change in net position before (2,036) (935) 5, ,054 (533) -117% Transfers in (out) 1,618 (8,222) (1,618) 8, Change in net position (418) (9,157) 3,472 8,624 3,054 (533) -117% Net postion - beg. of year 38,376 37,958 24,831 28,303 63,207 66,261 5% Net position - end of year $ 37,958 $ 28,801 $ 28,303 $ 36,927 $ 66,261 $ 65,728-1% 8

70 Figure A-3 Sources of Revenue for Fiscal Year Charges for Services 23.1% Capital grants and contributions 12.1% Taxes 56.1% Operating grants and contributions, 1.7% Miscellaneous 6.9% Investment Income, 0.1% Table A-3 presents the cost of each of the City s largest functions as well as each function s net cost (total cost less fees generated by the activities and intergovernmental aid). The net cost reflects what was mostly funded by local tax dollars. The cost of all governmental activities this year was $70.2 million. However, the amount that taxpayers paid for these activities through taxes was $50.97 million. Some of the cost was paid by those who directly benefited from the programs ($10.5 million), or by grants and contributions ($1.5 million). Table A-3 Net Cost of Selected City Functions (in thousands of dollars) Total Cost of Services Net Cost of Services FY FY % Change FY FY % Change Public Safety $ 30,057 $ 31, % $ 25,418 $ 27, % Public Works 12,973 8, % 12,441 7, % Parks and Recreation 3,632 4, % 2,033 2, % Planning and Environmental Services 3,413 2, % (92) (1,078) % Library 2,203 2, % 2,092 2, % 9

71 Business-type Activities Revenues derived from the City s business-type activities were $21.59 million, and operating expenses were $10.63 million. Governmental Activities The City reduced its total ad valorem property tax rate from $ per $100 of valuation in FY to $ That rate was maintained through FY During that time, the debt service tax rate increased to fully fund all debt service payments while the General Fund portion of the rate decreased by an equal amount. $ cents in tax rate shifted from debt service to the General Fund in that period. Property values for the ten years prior to FY showed an average annual growth rate of 11.7 percent. With the economic downturn, this robust growth can to a rather abrupt end. FY had growth in values of 2.9 percent and FY values declined by.9 percent overall, then rebounded slightly in FY , showing a 2.2 percent growth. In FY , the City increased the overall tax rate for the first time since FY with a $.0385 increase, all in the debt service rate. The General Fund tax rate was held at $ For FY , the City saw taxable property value increases of 11.1 percent. This increase in valuation provided the opportunity to avoid a tax increase and held the tax rate flat at $ Revenues for FY decreased $2.2 million or 2.7 percent in comparison to FY This decrease was driven in large part by a decrease in Capital grants and contributions. The highest percent of the revenues from charges for services in governmental activities was derived from planning and environmental development (building related permits and licenses), public safety (ambulance services fees and emergency services district fire and emergency response services), and parks and recreation. Solid Waste generates the greatest revenues in the business activities. The City s General Fund represents the largest single funding source for governmental activities. In FY , 56.2 percent of the funds (General Fund alone) went to public safety (police, fire and municipal court). The remaining funding breaks down as follows: 11.0 percent for public works, 8.6 percent for parks and recreation, and 21.2 percent for the library, planning and environmental development, finance and tax, and general government. The General Fund s total revenue (including the Equipment Replacement and Facilities Maintenance Funds) for FY was $46,993,203 which is $3,465,973 or 8.0 percent greater than the FY revenues. Most of the major revenue sources showed growth for FY in comparison to the prior fiscal year, including sales tax, a significant revenue source to the City. Only two revenue source experienced a decrease miscellaneous and investment income. This decrease in miscellaneous revenue is driven entirely by a catch-up payment in FY made by an entity that has a payment in lieu of taxes agreement with the City. Investment income decreased as a result of declining yield(s) from the City s investment portfolio. FINANCIAL ANALYSIS OF THE CITY S FUNDS Revenues from the General Fund (excluding the Equipment Replacement and Facilities Maintenance Fund) totaled $47.0 million for fiscal year while the expenditures were $45.0 million, leaving an excess of $2,015,186. The enterprise funds consist of Airport, Solid Waste, Golf Course, and Civic/Convention Center. The net change in net position from these funds was $1,542,989, $969,924, $6,302,304 and ($190,857) respectively, for a net total of $8,624,360. General Fund Highlights In FY , the City focused on developing a structurally balanced budget. In prior years, the City was able to rely on excess fund balance to fund new and recurring initiatives. However, in FY , there was no excess fund balance available and all revenue growth was needed to fund existing expenses. However, several positions were funded in FY , such as three new Police Officers. Operating budgets were all held fairly flat and very little equipment was included as well. In addition, to ensure that recurring revenues met recurring expenditures, the City temporarily suspended the equipment replacement program. This reduced expenditures by approximately $875,000. As a result, light vehicles and information technology infrastructure is replaced on as needed basis as opposed to a 10

72 set schedule. Now that the City has brought recurring revenues in line with recurring expenditures, the City will be able to utilize revenue growth to fund unmet needs required to support existing and growing demand for services. As stated above, the General Fund (when combined with the Equipment Replacement Fund and the Facilities Maintenance Fund) reported an ending fund balance for FY of $22,619,456, an increase of $2,767,859 or 13.9 percent in comparison to the prior fiscal year. The General Fund (alone) had an ending fund balance of $18,189,372, which is an increase of $3,000,196 or 19.8 percent in comparison to the prior year. That balance represents 40.4 percent of actual expenditures in that year. Taxes 56.1% Figure A-4 Sources of General Fund Revenue for Fiscal Year Licenses and Permits 5.4% Miscellaneous 6.9% Operating grants and contributions, 1.7% Charges for Services 23.1% Capital grants and contributions 12.1% Parks and Recreation 2.3% Interfund Transfers 1.6% Miscellaneous 2.7% Other Major Fund s Highlights The City s Debt Service Fund experienced a significant fund balance draw down in FY to bring the balance to the 10 percent level required by the City s financial policies. Since then, the fund s balance has stabilized at about the 10 percent level. As a result, for FY , revenue into the fund about equaled the annual debt service payments for principal and interest on all outstanding debt. As stated above, the City increased the ad valorem property tax rate for debt service by $ to generate sufficient funds for these payments. The City s self insurance fund experienced much higher claims expenditures for medical services in FY than in the several years prior. However, in the three fiscal years since that time, the City saw a return to costs more in line with prior years expenditure growth. This allowed the City to begin rebuilding the fund balance in this fund. This was accomplished by increased premium contributions (from the City and employees) as well as a one-time transfer of funds from the General Fund to the Self Insurance Fund of $500,000 in FY and $400,000 in FY In addition, in FY , adjustments were again made in premium contributions from the City and employees and some plan design changes were made. The City continues to evaluate this employee benefit to manage costs. In FY , the City reported four capital improvement funds as major funds the 2012 Certificates of Obligation Fund, the 2013 Certificates of Obligation Fund, the 2014 General Obligation Fund, and the 2014 Certificates of Obligation Fund. The 2012 certificates showed a decrease of $7,610,747 in fund balance as expenditures were made for design and construction of projects. The 2013 certificates showed a decrease of $6,718,980 in fund balance as project expenditures were made in the fund. The 2014 bonds showed an increase of ($10,622,469) due to $14.7 million in debt that was issued and some project expenditures were made in the fund. The 2014 certificates showed an increase of ($1,811,662) due to $10.4 million in debt that was issued and project expenditures were made in the fund. Over the last several years, the City has been issuing debt to fund projects in stages so that the proceeds of debt can be expended timely and projects can keep moving forward into the next phase without interruption due to lack of funding. 11